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；. CijL^^ 、• ^Qao "I: J ATTITUDE OF CORPORATE CUSTOMERS TOWARDS BANKS AND BANKING SERVICES IN HONG KONG
by
LAM YIN-SHING DONALD & HO CHI HUNG 林燕勝 何志雄
MBA PROJECT REPORT Presented to i^A^^ywk：^ The Graduate School In Partial Fulfillment “ of the Requirements for the Degree of MASTER OF BUSINESS ADMINISTRATION THREE-YEAR MBA PROGRAMME THE CHINESE UNIVERSITY OF HONG KONG May 1993 (DR DENNIS FAN) Supervisor ii ABSTRACT The industry structure of Hong Kong is becoming more service oriented and the banking industry is an important constituent contributing to the growth of the economy. Competitions in the industry are getting more intense, especially in the corporate banking sector. This is partly attributable to the homogeneity of products, i.e. money or loanable fund. Banks are competing with each others on both price and non-price terms despite the existence of a few dominant players. Previous studies on corporate customers' attitudes towards banks and banking services especially in the territory are either limited or out-dated in light of the fast changing business and political environment. This study tries to identify the profile of corporate customers, their banking behaviour and banking needs. A survey was conducted in December 1992 to solicit the chief executives/general managers of targeted companies their views towards banks and banking services in Hong Kong including their bank selection criteria. Similar to previous studies in Hong Kong, majority of the respondents maintained relationships with more than one bank. This is in sharp contrast with the banking behaviour of medium size companies without international exposure in the United Kingdom. However, they exhibited a high degree of loyalty to existing bank(s) with nearly 90 percent of them not having switched their main bank(s) in the preceding two years. The major reasons for leaving a bank were larger credit limits with fewer collateral requirement, better interest rate, better quality of service and longer term financing provided by new banks. iii The Bank of China Group is gaining popularity in the corporate sector. It is now among the first four best/most important banks. The four most important banks ranked in descending order were the Hongkong and Shanghai Banking Corporation Ltd, the Bank of China Group, the Standard Chartered Bank and the Hang Seng Bank Ltd. In terms of quality of service, the Hongkong and Shanghai Banking Corporation Ltd and the Standard Chartered Bank still maintained their respective rankings, but the Hang Seng Bank Ltd took over the position of the Bank of China Group as the second best bank in the territory. The Bank of China Group was ranked the fourth. The most frequently used banking services were current account, remittance, savings/time/swap deposits, foreign exchange and import/export finance. The non- traditional banking services such as insurance and management consultancy have become less frequently used as compared to the previous studies. The top ten bank selection criteria in decreasing order of importance were quality of service, operational efficiency, better pricing terms, flexibility in structuring facilities, fast decision making, long standing relationship, ease of access to bank, larger bank size (or stronger financial strength), stable and persistent lending even if it is conservative and stringent, and good relationship with bank account officers. The factors were similar to the findings of some previous studies but their rankings changed. Based on the findings of this study, recommendations are made to banks on how their marketing strategies should be formulated with the changing customer profile. iv TABLE OF CONTENTS ABSTRACT ii TABLE OF CONTENTS iv LIST OF TABLES vi ACKNOWLEDGEMENTS viii Chapter I. INTRODUCTION 1 The Bankii^ Industry 1 Corporate Banking in Hong Kong 4 Market Characteristics of Corporate Sector 13 II. THIS STUDY 16 Purpose of the Study 16 Justification of the Study 16 Scope of the Study 20 III. RESEARCH METHODOLOGY 22 Research Design 22 Sample Selection 23 Survey Design 23 Questionnaire Development 24 Timing of the Survey 25 IV. ANALYSIS OF FINDINGS 26 Response Rate 26 Demographics of the Samples 27 The Most Important Banks 35 Usage of Banking Services 38 Factors Inducing Bank Switching 44 The Best Banks 49 Determinant Attributes of Banks / Banking Services Excluding Lending Policy 50 Bank's Lending Policy re Determinant Attributes 54 V V. LIMITATIONS OF THE STUDY 57 Non-Response Bias 57 Response Bias 58 Sample Selection Bias 59 Language Used in Questionnaire 60 VI. COMPARISON OF STUDIES 61 Studies in Other Parts of the World 63 Study of KK Chan and S M Ma 67 VII. RECOMMENDATIONS 74 Market Segmentation 75 Market Positioning 77 Marketing Strategies 78 Other Recommendations 81 Directions for Future Research 85 VIIL CONCLUSIONS 86 APPENDICES 88 BIBLIOGRAPHY 103 vi LIST OF TABLES Table 1.1 Banks and Banking Offices in Hong Kong 2 Table 1.2 Contribution to GDP 3 Table 1.3 Liabilities and Assets : Licensed Banks 6 Table 1.4 Market Share of the Top Five Local Banks in Hong ... 7 Kong (Percentage of all locally incorporated banks) Table 1.5a Market Share of Assets of All Currencies for 10 Authorized Institutions by Country of Ownership (%) Table 1.5b Market Share of Loans for Use in Hong Kong for 10 Authorized Institutions by Country of Ownership (%) Table 1.5c Market Share of Hong Kong Dollar Assets for 11 Authorized Institutions by Country of Ownership (%) Table 1.5cl Market Share of Hong Kong Dollar Deposits for 11 Authorized Institutions by Country of Ownership (%) Table 1.6 Number of Establishments and Persons 14 Engaged by Major Industry Group Table 2.1 Hong Kong External Trade by Major 18 Trading Partners Table 2.2 Foreign Investment in Hong Kong's Manufacturing ... 19 Sector (Percentage of Total) 1980-88 (on Cumulative Totals Based on Original Costs) Table 4. la Place of Domicile of Respondent Companies 27 Table 4.1b Industry Sector 28 Table 4.1c Company History (Years) 28 Table 4. Id Number of Employees 29 Table 4.1e Sales Turnover (Last Year - HK$'millions) 29 Table 4. If Major Place of Operation 30 Table 4.1g Number of Respondents Having Investment in / 31 Trading Business with PRC vii Table 4. Ih Number of Years the PRC Connection had been 31 Established (for those Companies Having PRC Connection) Table 4.2 Number of Banks Maintained by Companies 34 Table 4.3 Ranking of Important Banks 36 Table 4.4 Relative Importance of Banks by Demographics 37 Table 4.5 Share of Transaction and Borrowing Activities 38 Table 4.6 Usage of Banking Services 39 Table 4.7 Percentage Never Heard of the Services 44 Table 4.8 Factors Inducing Bank Switching 46 Table 4.9 The Best Banks 50 Table 4.10 Determinant Attributes of Banks/Banking Services .... 51 Excluding Lending Policy Table 4.11 Determinant Attributes of Banks/Banking Services .... 55 re Lending Policy Table 4.12 Determinant Attributes of Banks/Banking Services .... 56 Table 6.1 Comparison of Multiple Banking Behaviour 64 (Geographical Difference) Table 6.2 Comparison of Determinant Attributes of Banks / 66 Banlang Services in Decreasing Order of Importance (Geographical Difference) Table 6.3 Comparison of Multiple Banking Behaviour 68 (Time Series) Table 6.4 Reasons for Leaving Main Banker (Time Series) 70 Table 6.5 Comparison of Most Important Bank Attributes 71 (Time Series) Table 6.6 Use of Financial Services (Time Series) 72 Table 7.1 The Marketing System - A Model 74 Table 7.2 Market Segmentation by Companies' 77 Demographics viii ACKNOWLEDGEMENT The authors wish to express their gratitude to the supervisor of this study, Dr Dennis K K Fan, for his valuable advice throughout the study. Without his guidance and encouragement, this study would not have had completed. Acknowledgements are also extended to all those companies which have rendered their assistance by returning the questionnaires. Special thanks go to all the companies the authors have interviewed in the pilot run of the questionnaire. The authors are also indebted to their wives for their tolerance and patience during the study. Despite all the help and suggestions offered to the authors, it is possible that errors and omissions occur in this report. This certainly remains the authors' responsibility. 1 CHAPTER I INTRODUCTION The Banking Industry Hong Kong as a Financial Centre Hong Kong has emerged as one of the prominent international financial centres in the world since late 70's. At the end of 1992, there were 164 licensed banks operating in Hong Kong (Table 1.1)，of which 134 banks were incorporated overseas. Among the top 100 banks in terms of assets in the world in 1991，83 have operations in the territory. Over 60 percent of the sector's aggregate assets and liabilities are external, spreading over more than one hundred countries. It is now the largest centre for international loan syndications in the Far East excluding Japan. Besides, over 90 percent of the People's Republic of China's ("PRC") external borrowings are arranged in Hong Kong, for instance, from World Bank and Asian Development Bank. In 1991， total assets of the banking sector grew by 7 percent to HK$5.6 trillion of which 79 percent were denominated in foreign currencies reflecting Hong Kong's role as a major international banking centre、 1 Hong Kong Government. Hong Kong Annual Report. Hong Kong: 1992. 2 Financial institutions in Hong Kong are classified as licensed banks, restricted license banks and deposit taking companies. This study will focus the discussion on licensed banks which account for 94 percent of the total loans of all authorized financial institutions^. Table 1.1 Banks and Banking Offices in Hong Kong No of No of Total Year End Licensed Banks Branches Offices 1964 88 204 292 1974 74 557 631 1984 140 1,407 1,547 1991 163 1,409 1,561 1992 164 - - Source : Hong Kong Monthly Digest of Statistics and Hong Kong Annual Reports, various issues. Contribution of the Banking Sector to GDP During the last decade, the fast growing Hong Kong economy has been transforming from manufacturing to service based. The contribution of the tertiary service sector to GDP has been rising from 60 percent in 1970 to 69 percent in 1990, and banking is one of the major constituents that contributed to the growth of the 2 Hong Kong Government. Annual Report of The Commissioner of Banker for 1991. Hong Kong: 1991. 3 sector^. As evidenced by Table 1.2，there is a trend of increasing contribution from the finance, insurance, real estate and business services sector. The finance, insurance, real estate and business services sector within the tertiary service sector now accounts for 8.4 percent of the total 2.8 million work force in Hong Kong. The banking sector employs around 2.6 percent of the total labour force and it is important to the Hong Kong economy both in terms of its output contribution and employment. Table 1.2 Contribution to GDP Percentage Contributions to GDP 1970 1982 1988 1989 1990 Manufacturing sector 31 21 20 19 17 Finance/insurance/ 15 24 19 20 21 real estate/business services Percentage Share of Employment 1971 1981 1991 Manufacturing sector 47 41 28 Service sector 41 47 63 Source : Hong Kone Monthly Digest of Statistics and Hong Kone Annual Reports, various issues. 3 Hong Kong Government. Hong Kong Annual Report. Hong Kong: 1992. 4 Profitability of Local Banks Most banks reported over 30 percent growth in net profit after tax in 19914. Net interest income provided the main impetus for growth in profits. The improvement in interest margins has reversed a trend of narrowing margins since mid 80's. The profits growth also benefited from increased domestic economic growth and from the continuous rapid expansion of the region generally. On the other hand, banks are facing a rise in labour and rental costs due to the double-digit inflation rates in the last few years. Some banks have invested heavily in automation of banking services and back-office support to improve efficiency. Since 1992，Hong Kong has adopted the international standard of 8 percent capital adequacy ratio under the Basle Agreement^. Thus, the asset growth of the banks is limited by the size of capital. This also adds pressure to banks especially the Japanese ones to widen their interest margins to justify a fair return on capital. Corporate Banking in Hong Kong Commercial banks (licensed banks) in Hong Kong normally divide their banking business into two areas: the retail and the corporate (or wholesale) sectors. The 4 Hong Kong Government. Annual Report of The Commissioner of Banker for 1991. Hong Kong: 1991. 5 Capital adequacy ratio is defined as the weighted risk assets over the tier one and tier two capital bases of a bank. In December 1987，representatives of the central banks and supervisory authorities of Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, the United Kingdom, the United States, Switzerland and Luxemburg met in Basle and proposed to standardize the measurement of banks' capital and to set minimum levels of capital adequacy. The objectives are to strengthen the stability of the international banking system and to remove a source of competitive inequality for banks or deposit taking institutions arising from differences in regulations (Scott, R H, Wong, K A, and Ho, Y K. The Hong Kong Financial System. Hong Kong: Oxford University Press, 1991 pp 103-108，112). Hong Kong has adopted the capital adequacy requirement since December 1989 pushing banks to meet the 8 percent minimum ratio by 1992. 5 distinction between the two is the types of customers targeted, i.e. individuals for retail sector and companies for corporate sector. Although the Hong Kong dollar deposit and lending market is dominated by a few local banks, the corporate banking sector especially on foreign currency deposit and lending is becoming more competitive due to the large number of players in the market. Balance Sheet of the Licensed Banks As shown in Table 1.3, the two major assets on the total banking sector balance sheet are amount due from banks abroad (43 percent, mostly inter-bank borrowings) and loans and advances to customers (40 percent, mostly to non-bank customers) for both Hong Kong dollar and foreign currencies. For the assets in Hong Kong dollar, loans and advances to customers accounted for 61 percent of total assets in 1991. However, HK$124 billion amount due to banks abroad were booked that represented the funding gap between local deposits and loans. Hong Kong dollar loan/customer deposit ratio was 75 percent for local banks on average but was 111 percent for all banks, i.e. foreign banks fund their local Hong Kong dollar loans by Hong Kong dollar deposits abroad. The Hong Kong dollar loans and advances to customers represents the bulk of the finance used by current business operations in Hong Kong. It grew by 20.6 percent per annum on average to HK$640 billion from 1961 to 19916. These indicate that the current market size in value of the corporate banking sector is over HK$2.1 trillion (HK$644 billion in Hong Kong Dollar and HK$ 1,473 billion in foreign currencies) and is growing steadily. 6 Hong Kong Government. Annual Report of The Commissioner of Banker for 1991. Hong Kong: 1991, and Hong Kong Government. Hong Kong Annual Report. Hong Kong: 1992. 6 Table 1.3 Liabilities and Assets : Licensed Banks As at end of year 1989 1990 1991 Foreign Foreign Foreign HK$ Currency Total HK$ Currency Total HK$ Currency Total Liabilities ($ Million) Amount due to authorized 194105 216150 410255 194184 244802 438986 228267 224906 453173 institutions in Hong Kong Amount due to banks abroad 82077 2259893 2341970 99939 2952025 3051964 124365 3113320 3237685 Deposits from customers (@) 358130 579524 937654 421560 733559 1155119 540193 771239 1311432 Negotiable certificates of 23483 7536 31019 26344 6455 32799 21284 4617 25901 deposit outstanding Other liabilities 74409 79039 153448 90313 89029 179342 118072 103725 221797 Total liabilities 732204 3142142 3874346 832340 4025870 4858210 1032181 4217807 5249988 Assets ($ Million) Notes and coins 5467 # 5467 5561 # 5561 6560 1695 8255 Amount due from authorized 198169 248340 446509 210075 262931 473006 265963 249829 515792 institutions in Hong Kong Amount due from banks abroad 22042 1957288 1979330 37314 2356751 2394065 42426 2214811 2257237 Loans and advance to 474343 698662 1173005 542902 1136674 1679576 644149 1473077 2117226 customers Negotiable certificates of 8083 9557 17640 9930 9026 18956 5377 8454 13831 deposit (NCD) held : Issued by licensed banks 7307 1432 8739 9239 1212 10451 4550 377 4927 in Hong Kong Issued by restricted 257 - 257 261 - 261 426 89 515 licensed banks in Hong Kong Issued by deposit-taking 405 125 530 338 109 447 301 225 526 companies in Hong Kong Issued by baiiks outside 114 8000 8114 92 7705 7797 100 7763 7863 Hong Kong Negotiable debt instrument n.a. n.a. n.a. n.a. n.a. n.a. 25012 174816 199828 held, other than NCDs : Acceptances and bills of 1308 21937 23245 1435 19275 20710 2839 29655 32494 exchange held floating rate notes and 9145 45535 54680 8634 46606 55240 4937 49608 54545 commercial paper held ( + ) Government bills, 15117 52813 67930 notes and bonds (*) Other debt instrumentB held (*) 2119 42740 44859 Investments in share-holdings (•) 29278 42485 71763 43284 56809 100093 8163 1226 9389 Interest in land and buildings (*) 28812 512 29324 Other assets (+) 23415 79293 102708 26981 84020 111001 27329 71778 99107 Total assetB 771250 3103097 3874347 886116 3972092 4858208 1053791 4196198 5249989 Number of licensed banks 165 166 160 in operations Notes : - @ unadjusted for foreign currency swap deposits. -ft Foreign currency component available only from 1991, figures before 1991 are included in 'Other assets' -+ Values from 1991 onwards are not strictly comparable to those in the past. -* The nearest equivalent for the total of these four items before 1991 is the item 'Treasury bills, securities, share-holdings and interests in land and buildings'. Source : Hong Kons Annual Report 1992 (Hong Kong Government) 7 Market Share Considering only the locally incorporated banks and the retail banking sector in Hong Kong, the banking market is highly concentrated^. The Hongkong Bank group ("HSBC Group"), i.e. including the Hong Kong and Shanghai Banking Corporation Ltd ("HSBC") and the Hang Seng Bank Ltd ("HASE") dominates the local bank market both in terms of loans (assets) or deposits as shown in Table 1.4. Table 1.4 Market Share of the top five local banks in Hong Kong (Percentage of all locally incorporated banks) 1983 1984 1985 1986 1987 DADADADADA Hongkong Bank 74 70 80 79 80 80 82 81 81 81 Hang Seng Bank 8.2 8.6 9.9 9.7 11 10 11 11 11 11 Bank of East Asia 1.6 1.7 2.0 2.0 2.3 2.2 2.3 2.2 2.3 2.3 Nanyang Commercial Bank 1.4 2.1 2.5 2.4 2.8 2.7 2.3 2.2 2.5 2.5 Shanghai Commercial Bank 1.7 1.8 2.1 2.1 2.0 2.0 1.8 1.8 1.7 1.7 Keys : D : Deposits; A : Loans (or Assets) Source : Hongkong Bank, Performance of Financial Sector, various issues. As foreign banks are not required to publish their financial statements, it is hard to know the share of the HSBC Group in the total banking sector. Freris?，however, estimated the share of the HSBC Group of the total banking market in Hong Kong in 1986 to be 29 percent in deposits and 21.7 percent in loans. 7 Freris, Andrew F. The Financial Markets of Hong Kong. London and New York: Routledge, 1991 p i9 8 Nevertheless, the dominance of the HSBC Group has been challenged by the Bank of China Group ("BOC Group")8. He further estimated that the Bank of China Group accounted for about 20 percent of the total deposits market. On the other hand, Scott, Wong and • took the view that HSBC Group's market shares in total deposit and total lending in 1987 were 30 percent and 9.5 percent respectively. Its share in Hong Kong dollar deposit was 42 percent as compared to 26 percent share in foreign currency deposits. Japanese banks' share of the total and Hong Kong dollar lending market in all currencies were 46 percent and 9 percent respectively. From the Annual Report of the Commissioner of Bankingi。in 1991，it is noted that "Japanese institutions continued to dominate the banking sector balance sheet (all currencies), though their share of the total remained the same as in 1990 (58 percent). Their share of offshore lending, almost all in foreign currencies, was even larger and has increased during the year to 90 percent. In contrast, the Japanese institutions lost 8 The BOC Group is comprised of nine China-incorporated banks, four Hong Kong-incorporated banks, and one Macau-incorporated bank. The 13 sister banks in Hong Kong under the leadership of the Bank of China, Hong Kong and Macau Regional Office are Bank of China (Hong Kong Branch, incorporated in Beijing), Bank of Communications (Hong Kong Branch, incorporated in Beijing), Nanyang Commercial Bank Ltd (incorporated in Hong Kong), the Kwangtung Provincial Bank (Hong Kong Branch, incorporated in Beijing), Sin Hua Trust, Savings and Commercial Bank, Ltd (Hong Kong Branch, incorporated in Beijing), the China and South Sea Bank, Ltd (Hong Kong Branch, incorporated in Beijing), Kincheng Banking Corporation (Hong Kong Branch, incorporated in Beijing), the China State Bank, Ltd (Hong Kong Branch, incorporated in Beijing), the National Commercial Bank, Ltd (Hong Kong Branch, incorporated in Beijing), Yien Yieh Commercial Bank Ltd (Hong Kong Branch, incorporated in Beijing), Po Sang Bank Ltd (incorporated in Hong Kong), Hua Chiao Commercial Bank Ltd (incorporated in Hong Kong) and Chiyu Banking Corporation Ltd (incorporated in Hong Kong). Some sister banks used to be specialized in particular area(s). For instance, the Bank of Communications is active in the money and foreign exchange market, Nanyang Commercial Bank Ltd acts better in credit card business, Po Sang Bank Ltd specializes in gold trading and Sin Hua Trust, Savings and Commercial Bank Ltd has a strong emphasis in the industrial loan market (Scott, R H, Wong, K A, and Ho, Y K. The Hong Kong Financial System. Hong Kong: Oxford University Press, 1991 pp 64-65). 9 Scott, R H, Wong, K A, and Ho, Y K. The Hong Kong Financial System. Hong Kong: Oxford University Press, 1991 pp 45-53 10 Hong Kong Government. Annual Report of The Commissioner of Banker for 1991. Hong Kong: 1991. 9 ground in the domestic market for loans for use in Hong Kong, although they continued to have a sizable share (24 percent of the total). The Chinese banks and the local banks expanded their market share, while those US and European banks declined. The Chinese and local banks also took a larger share of total Hong Kong dollar deposits. Together, these institutions accounted for about 75 percent of Hong Kong dollar deposits. The Japanese institutions are not active in this market, with only 4 percent of the total, a lower share than in 1990." From Tables 1.5a-d, it can be concluded that the Hong Kong dollar deposit and loan markets are dominated by the HSBC Group and the BOC Group. HSBC Group's shares in Hong Kong dollar deposit, Hong Kong dollar lending and lendings in all currencies markets are estimated to be no more than 50 percent, 30 percent and 15 percent respectively, whilst market shares of the BOC Group in the aforesaid markets are above 23 percent, 22 percent and 8 percent respectively. The Japanese banks still take a lion share of the inter bank market, mostly in foreign currencies. Their shares in Hong Kong dollar deposit, Hong Kong lending and lendings in all currencies are 4 percent, 16 percent and 58 percent respectively. 10 TABLE 1.5a Market Share of Assets of All Currencies for Authorized Institutions by Country of Ownership (%) 1986 1987 1988 1989 1990 1991 China (PRC) 8 7 8 8 8 8 Europe 17 15 14 13 12 11 Japan 46 55 56 56 58 58 USA 9 7 6 6 6 5 Others 20 16 16 17 16 18 Total 100 100 100 100 100 100 Note: Others represent all banks not incorporated in China (PRC), Europe, Japan or USA, including the locally incorporated banks. Source : Annual Report 1991 Commissioner of Banking Hong Kong. Table 1.5b Market Share of Loans for Use in Hong Kong for Authorized Institutions by Country of Ownership (%) 1986 1987 1988 1989 1990 1991 China (PRC) 16 16 16 14 13 15 Europe 16 17 18 18 17 16 Japan 18 21 23 25 26 24 USA 12 10 9 9 10 9 Others 37 35 34 34 34 36 Total 100 100 100 100 100 100 Note: Others represent all banks not incorporated in China (PRC), Europe, Japan or USA, including the locally incorporated banks. Source : Annual Report 1991 Commissioner o f Banking Hong Kom. 11 Table 1.5c Market Share of Hong Kong Dollar Assets for Authorized Institutions by Country of Ownership (%) 1986 1987 1988 1989 1990 1991 China (PRC) 19 19 21 19 20 22 Europe 19 20 18 18 16 16 Japan 9 11 14 17 17 16 USA 11 9 8 8 8 7 Others 42 41 39 38 38 39 Total 100 100 100 100 100 100 Note: Others represent all banks not incorporated in China (PRC), Europe, Japan or USA, including the locally incorporated banks. Source : Annual Report 1991 Commissioner of Banking Hong Kong. Table 1.5d Market Share of Hong Kong Dollar Deposits for Authorized Institutions by Country of Ownership (%) 1986 1987 1988 1989 1990 1991 China (PRC) 21 23 22 21 22 23 Europe 13 13 14 13 12 11 Japan 3 3 4 4 5 4 USA 7 7 6 6 6 5 Others 56 54 54 55 54 56 Total 100 100 100 100 100 100 Note: Others represent all banks not incorporated in China (PRC), Europe, Japan or USA, including the locally incorporated banks. Source : Annual Report 1991 Commissioner of Banking Hong Kons. 12 Inter-bank competitions The competitions in the corporate banking arena are quite intensive as most commercial banks offer similar banking services including some auxiliary services such as insurance, trust and safe deposit box etc. Apart from limited amount of service differentiation, banks carve their share of market by offering better price and different expertise. Price Competitions Interest rates on any savings and time deposits of less than 15 months of maturity, with the exception of deposits of HK$0.5 million or above and under three months maturity, are regulated by an interest rate agreement among banks. Smaller local and Chinese banks however are allowed to offer 0.25 percent higher than the base rate to their customers. On the lending side, banks are free to compete by offering interest rate at a margin over their best lending rate or even Hong Kong Inter-bank Offer Rate. Non-price Competitions Although establishment of more bank branches is a traditional method to attract more depositors, which has been adopted by the BOC Group since the 80’s，most banks compete on other fronts e.g. emphasis on quality of service and long term relationship etc. Many smaller local banks operate longer working hours than foreign banks and their management is more accessible to their customers offering them highly personalized services. Conversely, the growth of big corporate relationship for smaller banks is often hindered by the limitation imposed on the total advance extended by the 13 bank to any one person or company, or to any group of connected companies or persons not to exceed 25 percent of the bank's shareholders' fund. On the other hand, electronic banking services such as automatic teller machine ("ATM") and electronic payment system ("EPS") were introduced by larger banks to attract retail banking customers. In recent years, a number of banks have introduced electronic banking services to corporate customers in Hong Kong, e.g. Hongkong Bank, Chase Manhattan Bank, Standard Chartered Bank, Bank of America, Chemical Bank and Citibank etc. Smaller local banks, which cannot afford the huge capital investment, have reacted by joining the BOC Group's JETCO ATM network and by offering phone banking service as a substitute for the electronic banking system. Market Characteristics of Corporate Sector At the end of 1991，there were 304,538 companies (a 14.7 percent increase over the previous year) registered under the Company Ordinance. In addition, there were 2,828 foreign incorporated companies from 69 countries operated in the territory, including 635 from the US, 354 from the United Kingdom and 299 from Japan. Besides, the total number of business entities including limited companies, sole proprietorships and partnerships etc., i.e firms applying for business registration certificates, amounted to 516,633 - an increase of 7.6 percent as compared to the previous year. Out of them, 107,240 firms were newly registered (a 17.7 percent increase)n. The number of establishments and persons engaged in the private sector by major industry groups are tabulated in Table 1.6. 11 Hong Kong Government. Hong Kong Annual Report. Hong Kong: 1992. 14 Table 1.6 Number of Establishments and Persons Engaged by Major Industry Group Establishments Persons Engaged 1990 1991 1990 1991 Mining 7 7 511 444 Manufacturing 49449 44388 715597 629170 Water, Electricity and Gas 21 23 11624 11799 Construction 1285 1199 69138 59292 Wholesale, Retail, Import/Export Trade 140875 149567 829448 871850 Restaurant and Hotel Transport, Warehouse 6075 6445 132792 134088 and Communication Finance, Trading, 30071 34242 276621 295866 Real Estates, Business Services Social Welfares 23307 23788 249578 267291 Source : Hong Kong Monthly Digest o f Statistics. November 1992. Although these companies are the target corporate customers of the commercial banks, only a portion of them can generate significant size of business for a bank to establish a corporate banking relationship, and some of them are grouped together as conglomerates. Thus, although total number of firms are over half a million, the total target market size is estimated to be less than fifty thousand. Manufacturing industry used to be the largest sector of the local economy. However, its position has been taken over by the wholesale, retail and import/export trades, restaurants and hotels sector in 1987. Its significance is further eroded by the finance, insurance, real estate and business service sector. Nevertheless, it still accounted for around 17 percent of GDP in 1990. In fact, due to rising labour cost and continuous labor shortage in Hong Kong, most manufacturing companies have shifted labour-intensive and low-value-added 15 production into the PRC to take advantage of its low production costs. The total value of imports from the PRC related to outward processing in 1991 was HK$197 billion, or 67 percent of total imports. The total value of exports to the PRC for outward processing in the same year was HK$114 billion, or 56 percent of total exports to the PRC. Apart from that, companies in the insurance and banking sectors have started to move some of their labor-intensive back-office operations there. Furthermore, being tempted by its large potential market, companies have even begun to establish their retail outlets in the country. The total visible trade between Hong Kong and the PRC amounted to HK$510 billion in 1991，a 27 percent increase over the previous year. It is the second largest market for Hong Kong domestic exports and it is both the largest market and source of Hong Kong re-exportsi2. In 1990, there were 49,449 establishments in the manufacturing sector in Hong Kong. It was reduced by 11.4 percent to 44,388 at the end of 1991. The sector employed some 629 thousand people, a 12 percent reduction from 1990. The import/export trade sector has been growing. In 1946，Hong Kong's trading volume amounted to less than HK$2 billion which has increased 100 folds by 1980 and further jumped to HK$ 1,544 billion in 1991. At the end of 1991，there were 149,567 establishments in the wholesale, retail, import/export trades, restaurants and hotels sector, employing around 870 thousand people (5 percent growth). This sector accounted for 28 percent of all firms in 1991. Hong Kong is now among the top ten cities in the world in terms of trading volumei^. , 12 Hong Kong Government. Hong Kong Annual Report. Hong Kong: 1992, and Hong Kong Government. Hong Kong Monthly Digest of Statistics, various issues. 16 CHAPTER II THIS STUDY Purpose of the Study This study aims at finding out the attitudes of corporate customers, and their changes, if any, toward banks and banking services in Hong Kong. Justification of the Study Increasing Economic Ties between Hong Kong and China (PRC) The PRC has adopted "open door" policy since 1978 when it embarked on a programme of economic reforms for modernizing agriculture and industry. Hong Kong was ideally placed - politically (the 1997 issue), geographically and culturally - to act as a bridge between the PRC and the outside world. The PRC has progressively become the most important direct trading partner for Hong Kong (Table 2.1). Domestic exports and re-exports to the PRC accounted for 23.5 percent (HK$54.4 billion) and 28.7 percent (HK$153.3 billion) of our total domestic export and re-export in 1991. And PRC has provided 37.7 percent (HK$293.3 billion) of our total import in the same year. Furthermore, the "open- 17 door" policy of the PRC and its abundant supply of cheap labour have attracted a lot of industrialists to make various forms of investment in PRC. In 1987，Hong Kong investment in the PRC accounted for 65 percent of all foreign investment therein. It has been estimated that nearly three million workers in the PRC are directly employed by Hong Kong enterprises. The PRC has become a very important outward processing site for Hong Kong manufacturers. On the other hand, the PRC is now the third most important foreign investor in Hong Kong's manufacturing sector (Table 2.2). The Bank of China Group ("BOC Group") The BOC Group is now the second largest local banking conglomerate in Hong Kong after the HSBC Group. In the last few years, it has expanded its market share to around 20 percent of the local deposits and loans marketi4. Besides retail sector, it becomes more aggressive in corporate finance and foreign exchange markets. It is one of the three alternate Chairmen of the Hong Kong Association of Banks and is ready to issue currency notes in 1994. Its influence is further strengthened by the fact that Hong Kong is to be returned to the PRC by 1 July 1997. 13 Federation of Hong Kong Industries. Hong Kong's Offihore Investment: a Survey on Hong Kong's Industrial Investment in Overseas Countries. Industry and Research Division, 1990. 14 Freris, Andrew F. The Financial Markets of Hong Kong. London and New York: Routledge, 1991 pp 17-21. 18 . Table 2.1 Hong Kong External Trade by Major Trading Partners 1989 1990 1991 1990-91 change in $ Million percent $ Million percent $ Million percent percent IMPORTS Source China 196676 34.9% 236134 36.8% 293356 37.7% 24.2% Japan 93202 16.6% 103362 16.1% 127402 16.4% 23.3% Taiwan 51587 9.2% 58084 9.0% 74591 9.6% 28.4% United States 46234 8.2% 51788 8.1% 58837 7.6% 13.6% Republic of Korea 25465 4.5% 28155 4.4% 34944 4.5% 24 1% Singapore 22244 4.0% 26122 4.1% 31525 4.0% 20.7% Federal Republic of Germany (note) 13803 2.5% 14828 2.3% 16641 2 1% 12 2% United Kingdom 12965 2.3% 14118 2.2% 16545 2.1% 17.2% Italj' 9901 1.8% 10842 1.7% 11729 1.5% 8.2% Switzerland 9696 1.7% 11480 1.8% 10781 1.4% -6.1% Others 81007 14.4% 87618 13.6% 102632 13.2% 17.1% Merchandise Total 562780 100.0% 642531 100.0% 778983 100.0% 21.2% DOMESTIC EXPORTS Destination United States 72162 32.2% 66370 29.4% 62870 27.2% -5.3% China 43272 19.3% 47470 21.0% 54404 23.5% 14.6% Federal Republic of Germany (note) 15757 7.0% 17991 8.0% 19318 8.4% 7.4% United Kingdom 14638 6.5% 13496 6.0% 13706 5.9% 1.6% Japan 13028 5.8% 12079 5.3% 11666 5.0% -3.4% Singapore 5804 2.6% 7796 3.5% 8794 3.8% 12.8% Taiwan 4460 2.0% 5720 2.5% 6066 2.6% 6.0% Netherlands 4756 2.1% 4964 2.2% 5238 2.3% 5.5% Canada 6299 2.8% 5366 2.4% 5014 2.2% -6.6% France 3620 1.6% 3626 1.6% 3710 1.6% 2.3% Others 40308 18.0% 40998 18.2% 40260 17.4% -1.8% Merchandise Total 224104 100.0% 225876 100.0% 231046 100.0% 2.3% RE-EXPORTS Destination China 103492 29.9% 110908 26.8% 153318 28.7% 38.2% United States 72033 20.8% 87752 21.2% 110802 20.7% 26.3% Federal Republic of Germany (note) 13502 3.9% 23406 5.7% 32073 6.0% 37.0% Japan 22268 6.4% 24376 5.9% 29574 5.5% 21.3% Taiwan 16478 4.8% 21248 5.1% 24765 4.6% 16.6% United Kingdom 8918 2.6% 12107 2.9% 14663 2.7% 21.1% Republic of Korea 13279 3.8% 13011 3.1% 14631 2.7% 12.5% Singapore 11029 3.2% 12572 3.0% 12094 2.3% -3.8% France 4543 1.3% 6415 1.5% 9038 1.7% 40.9% Canada 5413 1.6% 6527 1.6% 8498 1.6% 30.2% Others 75451 21.8% 95677 23.1% 125385 23.4% 31.1% Merchandise Total 346406 100.0% 413999 100.0% 534841 100.0% 29.2% Note : In connection with the unification of Federal Republic of Germany (FRG) and German Democratic Republic (GDR) in October 1990, “ the trade figures for FRG in 1990 and previous years have been revised by adding those of the previous GDR. This is to ensure comparability of these trade figures with those after the German unification. Source : Hong Kouq Annual Report 1992 (Hong Kong Government) 19 Table 2,2 Foreign Investment in Hong Kong's Manufacturing Sector (Percentage of Total) 1980-88 (on cumulative totals based on original costs) 1980 1984 1985 1986 1987 1988 USA 43.6 53.7 36.4 41.0 36.4 34.0 Japan 31.5 21.0 21.0 20.5 26.5 26.6 PRC n.a. n.a. 18.3 15.2 8.2 11.2 UK 6.9 6.9 6.7 5.5 7.0 9.0 Source : "Report on the survey of overseas investment in Hong Kong's manufacturing Industries \ Industry Department, Hong Kong, 1989. Because of the stronger economic ties between Hong Kong and the PRC, and the BOC Group factors, corporate customers having various forms of interest in China may consider "Connections with PRC" as one of the criteria in choosing their banker(s). The study would investigate whether a bank's image of having PRC connections is a favourable factor in choosing a bank by corporate customers with or without PRC interest or business connection. Electronic Banking and Electronic Data Interchange As mentioned above, larger banks are offering electronic banking system as an edge over non-price inter-bank competition. Its use is now gaining popularity. Corporate users are just required to hook their personal computers via telephone lines to banks' main frame computer. Through their terminals, they can access their accounts, perform cash portfolio management, open documentary credits etc without leaving their offices. A lot of queuing time and thus manpower can be saved. 20 Furthermore, the electronic banking system is considered to be a platform for developing electronic data interchange ("EDI"). It is the exchange of structured trade data between the computers of the government, trading companies, shipping companies and banks, etc, thus replacing the traditional paperwork system. This will eventually reduce trading time and costs tremendously. This study will investigate whether the availability of electronic banking system affects corporate customer's choice of banks. Other Studies The most recent study on corporate customer attitude towards banks was conducted in 198715. The rapid economic and political changes of the PRC and Hong Kong warrant a re-investigation of the issue at this point of time. The study would identify any change of corporate customers' banking behaviour as time evolves. Scope of the Study A number of studies have been carried out in the past on consumer attitudes towards banking in various countries. Most of them, however, focused on the retail banking side. So far, only two articles addressed the issue in the corporate banking area in Hong Kong16 and they were all completed in the mid 80's. In order to position 15 Chan, K K，and Ma, S M (1990). "Corporate Banking Behaviour: A Survey in Hong Kong," International Journal of Bank Marketing, Vol 8 No 1 pp 25- 31. 16 Chan, K K, and Ma, S M (1987). "Hong Kong Companies' Attitudes Towards Banking and Financial Services: A Survey Approach in the Manufacturing Sector," The Hong Kong Manager. Vol 23 No 5 pp 17-30，and Chan, K K, and Ma, S M (1990). ”Corporate Banking Behaviour: A Survey in Hong Kong," International Journal of Bank Marketing, Vol 8 No 1 pp 25- 31. 21 right in the corporate banking sector, banks should have more in-depth and up-to-date understanding on the buying behaviour of their corporate customers. This study aims at finding out the attitudes of corporate customers, and their changes, if any, toward banks and banking services in Hong Kong. A mailed survey was conducted to collect information about how corporate customers select their bankers, and their views and preferences on banking services available in Hong Kong. The results of this study would be compared with the findings of the previous studies in Hong Kong as well as some studies in other parts of the world!?. Besides, the authors would attempt to make recommendations on how corporate bankers should position themselves for in order to face the challenge of the 90's - an era of change. 17 Rosenblatt, J, Laroche M, Hochstein, A, McTavish R, and Sheahan, M (1988). "Commercial Banking in Canada: A Study of the Selection Criteria and Service Expectations of Treasury Officers," International Journal of Bank Marketing, Vol 6 No 4 pp 19-30, Turnbull, P W (1983). "Corporate Attitudes Towards Bank Services," in Cheese, J (Ed), Insights in Bank Marketing, MCB University Press, Bradford pp 94- 104, Turnbull, P W (1984). "The Use of Foreign Banks by British Companies" in Cheese, J (Ed), Insights in Bank Marketing. MCB University Press, Bradford pp 121-133 and Turbull, P W and Gibbs，M J (1989). "The Selection of Banks and Banking Services Among Corporate Customers in South Africa," International Journal of Rank Marketing. Vol 7 No 5 pp 36-39. 22 CHAPTER III RESEARCH METHODOLOGY Research Design In this study, the authors have defined two research areas, namely, the attitudes of corporate customers towards banks in Hong Kong, and the attitudes of corporate customers towards banking services in Hong Kong. The following information would be required to understand the first area : i. The most preferred bank(s) of corporate customers. ii. The determinant attributes in the bank selection process. iii. The determinant attributes as perceived by corporate customers. iv. Their banking behaviour, e.g. multiple or split banking, bank switching, length of relationship. V. Degree of satisfaction with their existing banker(s). The following information would be required to understand the second area : i. The services available currently. ii. Ratings of banking services in terms of quality, range, pricing etc. iii. Usage of various banking services. 23 In addition, the following information would give a clearer picture of the banking sector in Hong Kong: i. The Hong Kong banking industry in general. ii. The evolution of corporate banking services in the past five years, e.g. the development of electronic banking. iii. The demographics of corporate customers in Hong Kong. iv. The decision makers in the buying process. V. Existence of any correlation between the above factors and the demographics. Sample Selection The target population was limited to companies in Hong Kong. Five hundred companies were randomly selected from the Membership List of the Hong Kong General Chamber of Commerce (the sample frame). It was believed that the Membership List represented fairly those actively run companies/groups in Hong Kong. Survey Design The sample polling method chosen was a mail survey in which respondents received a questionnaire written in both English and Chinese, accompanied by a bilingual covering letter, and a stamped return-addressed envelope. It was believed that the average response rate for this kind of mail survey was between 10 percent to 15 percent typically for mailed survey. To boost the rate further, an advanced notice was sent to the selected companies three days before the questionnaire was despatched. All 24 correspondences were addressed to the Chief Executive/General Manager. The signing of every letter by the researchers and the advisor and the use of stamps on return envelopes rather than postage meter were designed to highlight the expenses and additional efforts borne by the researchers in an effort to enhance response rate. The strategy of using advanced notice to boost the response rate was adopted from the previous study in 1987 by Chan and Mais in which the response rate was as high as 23 percent. A mail survey was chosen over alternative methods, such as personal or telephone interview. The complexity and length of questioning made it impossible for personal interviews where respondents might feel hurried or biased in the presence of an interviewer. Mail survey gives respondent time and flexibility to verify his sources of information and construct unhurried replies. It also offers anonymity to allow respondent room to answer questions of confidential nature, as well as easy access to a widely-dispersed sample of companies, while avoiding the problems of travel, interviewer objectivity, and bilingual qualifications. Questionnaire Development The questionnaire was divided into three sections. The first section was designed to gather general information on the important bank(s), the reasons to switch bank and the banking services that were frequently used by the respondent. The second section was to find out the bank selection criteria of the respondent while the third section was related to the demographics of the respondent. 18 Chan, K K，and Ma, S M (1990). "Corporate Banking Behaviour: A Survey in Hong Kong," International Journal of Bank Marketing. Vol 8 No 1 pp 25- 31. 25 Pre-test of the questionnaire was done among a random sample of 15 companies that the researchers personally knew. They were all completed with additional comments noted for improvement of the questionnaire design. The pre-test also ensured that prospective respondents could fully understand the questionnaire. Timing of The Survey Advanced notices and questionnaires were sent on 13 November 1992 and 17 November 1992 respectively. Completed questionnaires received before 20 January 1993 were used for the analysis. 26 CHAPTER IV ANALYSIS OF FINDINGS The data collection instrument was a questionnaire which was mailed to every sampling unit in the sample frame. Analysis of the results is detailed in the following sections, namely, response rate, demographics of respondents, usage of banking services, factors inducing bank switching, the best banks, determinant attributes of banks and banking services. In the discussion, if two data groups are said to be differed significantly from each other or two variables are said to have a certain relationship, they have been tested statistically with 95 percent confidence level, unless otherwise stated. Response Rate The response rate was encouraging. Out of 500 questionnaires sent, a total of 112 completed questionnaires were received by 20 January 1992 representing a response rate of 22.4 percent. 27 Demographics of the Samples The demographics of the sample companies were analyzed in two aspects, namely, the companies themselves and their banking behaviour. The Company General Over 80 percent of the respondents were domiciled in Hong Kong. Most of the respondents (60 percent) were in the import/export/trading sector. Seventy percent had been set up for more that ten years. (Tables 4. la-c) Table 4.1a Place of Domicile of Respondent Companies Hong Kong 82.7% United States •6.4% Japan ,0.9% United Kingdom • 1.8% Germany •1.8% Bermuda •3.6% Others ^2.1% I I 1 I I 0 20 40 60 80 100 28 Table 4.1b Industry Sector Manufacturing mm^ma^^mam 18.8% Import/Export/Trading 60.7% Service & Finance 8.0% Land & Property , 2.7% Engineering •2.1% Others ^^7.1% 1 I I I I 0 15 30 45 60 75 Table 4.1c Company History (Years) 1 - below 3 years 圓 4.5% 3 - below 5 years b^h 8.1 % 5 - below 10 years mm^m 15.3% 10 - below 50 years 68.5 % 50 years or above •3.6% I I I I I 0 20 40 60 80 100 Size Half of them had less than 50 employees, 20 percent had 50 to 99 employees and 9 percent had more than 1000 employees. On average, their annual sales turnovers were quite low, with 55 percent having annual sales below HK$50 million. Only 17 percent had sales turnover exceeding HK$500 million. The distribution was less 29 skewed to the right as it is believed that over 90 percent of companies in Hong Kong are typically small companies, both in terms of number of employees and sales turnover. The sample obtained with larger company size is more relevant to this study as they present significant lending opportunities to banks (Tables 4.1 d-e). Table 4.1d Number of Employees Below 50 ^^^HB^^HH^^HHa^^Hiai^^HHH^^Hi^H 53.6% 50-99 ^^bbb^hi 16.1% 100 - 199 200 - 499 ^^7.1% 500 - 999 1000 - 4999 8.9 % I I I I I I 0 10 20 30 40 50 60 Table 4.1e Sales Turnover (Last Year - HK$'millions) below 10 21.6% 10 - below 25 ^^h^hi^hb^hi^hiib^^hi^h 21.6% 25 - below 50 m^a^m^^t^^mi^m 12.6 % 50 - below 100 m^m^mK^mi^ 9.0% 100 - below 500 mt^^^^m^^m^m^^a^^mmm 18.0% 500 or above 17.1% I I I I I 0 5 10 15 20 25 30 Place of Operation About 52 percent quoted that Hong Kong was the major place of operation of their business. Seventeen percent quoted US and 4 percent quoted PRC. With 48 percent of companies having their major place of operation overseas, this indicates that business in Hong Kong is more international in nature. Hong Kong is considered as a door for overseas investments entering the PRC. Because of the rising wage rate in Hong Kong, a number of companies in Hong Kong have started their operations in the country. The "open door" policy of the Chinese Government since 1979 also encourages investment in the country. In the survey, nearly two thirds of the respondents expressed that they had either investment in or trading business with the PRC. Among them, 65 percent had established the relationship for less than ten years and 30 percent had just set up the connection for no more than five years. Only about 5 percent had a PRC connection of over 20 years (Tables 4.1 f-h). The young relationship of most companies with the PRC appears to indicate that the "open door" policy started in 1979 may be a factor inducing foreign investment in or business with the PRC. Table 4.If Major Place of Operation Hong Kong ^^Hi^Hi^m^HB^HH^HBi^^HH^^Baai 52.2% United States 17.4% Japan ^^4.3% United Kingdom •1.4% Germany PRC ^^4.3% Others ^hh^h 13.0% I I I I 1 1 0 10 20 30 40 50 60 31 Table 4.1g Number of Respondents Having Investment in / Trading Business with PRC No h^^^^b^mhhhh 37.5% Yes 1 1 I I I 0 15 30 45 60 75 Table 4.1h Number of Years the PRC Connection had Been Established (for those Companies Having PRC Connection) 0 - 10 years 64.6% 10-20 years 30.8% 20 - 30 years 30 - 40 years 0.0% 40 - 50 years 0.0% Above 50 years • 1.5% ^ ^ ^ ! 0 20 40 60 80 Banking Behaviour Decision Making Process - Buying Centre The decision to use a particular bank was usually made by the owner of the company (24 percent), the chairman of the board (33 percent) or the chief executive 32 officer (26 percent). As expected, the decision making authority is centralized since the decision has a significant impact on the company's operation. Multiple Banking Multiple banking (or split banking) was common in the sample. Around 84 percent of the respondents had two or more bankers. Twenty six percent had four to ten bankers and barely about 7 percent had more than ten bankers. Table 4.2 shows the number of bankers that respondent companies had. The adage that one should not put all eggs in a basket may be one of the reasons for multiple bankingMoreover, it may have the advantage that they can be assured of being given the finest rate and not restricted by any one bank on the total facility limit or exposure. Multiple banking may also help to minimize charges for customer transactions across banks especially import/export services. Furthermore, relationship (or "kuan xi") plays an important role in the Chinese culture and it is believed that bankers with longer and better relationship are more likely to help the companies in hard times. The importance of relationship was evidenced by the high degree of bank loyalty among respondents. Sixty percent of them had established relationship with their most important bank for over ten years, 87.5 percent of them stated that they had not changed their main banker(s) in the preceding two years. In the survey, the number of banks that a company maintained was found to be statistically dependent on its size, both in terms of number of employees and sales 19 Turbull, P W and Gibbs, M J (1989). "The Selection of Banks and Banking Services Among Corporate Customers in South Africa," International Journal of Bank Marketing. Vol 7 No 5 pp 36-39. 33 turnover, and the number of years since the company established. Smaller and younger companies kept fewer banks in general. The fact that their smaller and younger business may be perceived as less attractive to banks both in terms of account profitability and higher credit risk limits their ability to develop and maintain relationships with larger number of banks. Whereas, larger companies with longer history may be more confident that their business is important to the banks as well, and are less worried about the relationship though still important to them. For companies with higher gearing ratio, it is believed that keeping multiple banking relationship is important as they may not be able to raise enough funds just from one bank, however, no statistically significant difference was revealed from the survey. Besides, there was a tendency with 90 percent confidence that companies with either investment or trading business in the PRC maintained more banks. In order not to disrupt the existing banking relationship for normal business, companies with interest in the PRC may just resort to an additional bank with better connection with the country to deal with their business there. Satisfaction with the Most Important Banker In general, the respondent companies were quite satisfied with the services provided by their most important bank. In a five-point scale, with "1" denoting very satisfied and "5" very dissatisfied, the respondents were asked to indicate the degree of satisfaction with their first most important bank. The average rating was 2.25, with over 65 percent of them rated one or two. 34 Table 4.2 Number of Banks Maintained by Companies No of Banks Maintained 1 2 3 4-10 over 10 Total Overall 16.2 % 31.5% 18.9% 26.1% 7.2% 100% Year Setup Less than 5 yrs 42.9% 50.0% 7.1% 0.0% 0.0% 100% 5 to less than 10 0.0% 35.3% 23.5% 41.2% 0.0% 100% 10 or above 13.9% 27.8% 20.3% 27.8% 10.1% 100% Size (No of Employee) < 50 22.0% 42.4% 22.0% 13.6% 0.0% 100% 50-99 11.1% 22.2% 38.9% 22.2% 5.6% 100% more than 100 8.8% 17.6% 2.9% 50.0% 20.6% 100% Sales Turnover less than $50M 23,0% 45.9% 16.4% 13.1% 1.6% 100% $50M or more 8.0% 14.0% 22.0% 42.0% 14.0% 100% Gearing Ratio < 50% 18.8% 33.3% 17.4% 24.6% 5.8% 100% 50% or above 11.9% 28.6% 21.4% 28.6% 9.5% 100% Industry Manufacturing 9.5% 42.9% 19.0% 19.0% 9.5% 100% Trading/Import/Export 13.4% 28.3% 23.9% 29.9% 4.5% 100% Service 33.3% 22.2% 11.1% 22.2% 11.1% 100% Others 28.6% 35.7% 0.0% 21.4% 14.3% 100% Place of Domicile Hong Kong 16.7% 32.2% 17.8% 26.7% 6.7% 100% Others 15.8% 21.1% 26.3% 26.3% 10.5% 100% Major Place of Operation Hong Kong 13.9% 25.0% 25.0% 22.2% 13.9% 100% Others 15.6% 31.3% 15.6% 34.4% 3.1% 100% Company's Interest in PRC Without 16.7% 35.7% 23.8% 19.0% 4.8% 100% With 15.9% 29.0% 15.9% 30.4% 8.8% 100% 35 Gearing Ratio (Bank Borrowing over Shareholders' Equity) Bank borrowings were kept at a minimum for most of the respondent companies. Two thirds of them borrowed less than 50 percent of the shareholders' equity, especially for those having a smaller scale of operation in terms of number of employees. Only 8.6 percent have a gearing ratio of over 150 percent. Sales volume did not have much to do with the level of bank borrowings. The Most Important Banks Thirty four percent of the respondents named the Hongkong and Shanghai Banking Corporation Ltd ("HSBC") as the first most important bank of their companies, 12 percent and 11 percent named the Bank of China Group ("BOC Group") and the Standard Chartered Bank ("Standard") respectively. As the second most important bank, HSBC, BOC Group and Standard got 25 percent, 18 percent and 9 percent of the total rally respectively. Around 18 percent quoted HSBC, 14 percent quoted BOC Group and 9 percent quoted Hang Seng Bank Ltd ("HASE") as their third most important bank. Other banks received much smaller counts. As a matter of fact, the significance of BOC Group in Hong Kong is growing. It now accounts for over 23 percent of the total Hong Kong dollar deposit base as estimated in Chapter 1. Regardless of their places of domicile, nearly 90 percent of the respondent companies had maintained at least one local bank as their important bank. Of those companies domiciled in Hong Kong, around 91 percent (83 out of 91) had local bank(s) as their most, second most and/or third most important bank(s). Whereas those domiciled outside Hong Kong showed no preference in using local or foreign banks as their most, second most and/or third most important bank(s). It seems that the major place of operation of the respondent companies either in or outside Hong Kong had no 36 correlation to the choice of local or foreign banks. The foreign banks most frequently quoted were Citibank, Bank Nationale de Paris ("BNP") and Belgian Bank. Weights of three, two and one are given to banks having been quoted as the most important, second most important and third most important banks respectively, the ranking of the four banks named above are tabulated in Table 4.3. The same method is used in comparing the relative importance of banks among companies of various demographics in Table 4.4. Table 4.3 Ranking of Important Banks Name Relative Weight Most Important Hongkong and Shanghai 1.49 Banking Corporation Ltd Second Most Important Bank of China Group 0.71 Third Most Important Standard Chartered Bank 0.47 Fourth Most Important Hang Seng Bank Ltd 0.36 Note : relative weight: total weight divided by number of respondents The ranking of banks remained unchanged among companies of various sizes, income levels, gearing ratios or having PRC interest or not. However, the significance for each group of banks changed. On the other hand, the relative importance in terms of average rating of each bank or bank group varies among companies of different sizes, gearing ratios or having interest in the PRC. For each bank or bank group, the rating in each demographic group higher than the overall rating is highlighted in Table 4.4 to show the underlining trend. For example, HSBC was favoured by companies with 100 employees or more, 37 HK$50 million sales turnover or more, gearing ratio lower than 50 percent and no interest in the PRC. As expected, BOC Group was considered as more important by companies having interest in the PRC. The BOC Group may be perceived to have better PRC connection. Local Chinese banks were favoured by smaller companies as these banks might impose less stringent financing requirements on them. Table 4.4 Relative Importance of Banks By Demographics Other BOC Local HSBC Group Standard HASE Banks Overall 1.49 0.71 0.47 0.36 0.50 Size (number of employees) Less than 50 1.48 0.83 0.40 0.28 0.70 50-99 1.28 0.56 0.72 0.56 0.17 100 or more 1.62 0.56 0.47 0.38 0.32 Sales Turnover Below $50M 1.42 0.89 0.39 0.45 0.76 $50M or more 1.57 0.49 0.59 0.24 0.18 Gearing Ratio Below 50% 1.66 0.59 0.39 0.46 0.49 50% or more 1.23 0.97 0.63 0.23 0.54 Interest in PRC \ Without 1.62 0.38 0.64 0.43 0.48 With 1.41 0.90 0.37 0.31 0.51 Note : relative weight: total weight divided by number of respondents in that group On average, the share of transactions through their most important banks and the share of borrowing activities with them were around 71 percent and 50 percent 38 respectively, which were several folds of those with their second and third most important banks. Details are shown in Table 4.5. Table 4.5 Share of Transaction and Borrowing Activities Share of Share of Banks Transactions Borrowing Activities Most Important Bank 71.4% 49.8% Second Important Bank 22.4% 15.3% Third Important Bank 11.1% 8.7% The deviation between the share of transactions and the share of borrowing activities may be interpreted as: i) Companies rank the importance of bank more by transaction volume, and ii) Company borrowing needs could not be fully satisfied by the important bank(s). Usage of Banking Services Twenty three kinds of banking services had been identified as frequently used. The respondents were asked to indicate how frequently their companies used these banking services in a five-point scale, with "1" denoting very frequently, "5” very rare. The results are tabulated in Table 4.6. 39 Table 4.6 Usage of Banking Services % rated % rated Average Services below 3 above 3 Rating a. Current Account 100.0 0.0 1.03 b. Remittance 79.0 3.6 1.71 c. Savings / Time / Call Deposits 66.7 18.5 2.09 d. Foreign Exchange 64.2 16.0 2.15 e. Imports / Exports Finance 63.5 26.0 2.32 f. Corporate Credit Cards 33.0 53.2 3.46 g. Electronic Banking Services 29.8 60.6 3.60 h. Swap Time Deposits 27.3 61.3 3.61 i. Financial Information Services 23.3 61.1 3.77 j. Trade Credit Information (banker's opinion) 18.9 62.1 3.78 k. Phone banking 19.8 68.1 3.97 1. Trustee Services 17.1 70.5 4.09 m. Leasing / Hire-purchase 13.4 76.3 4.14 n. Project Financing / Loan Syndication 14.6 71.9 4.16 o. Insurance Services / Brokers 12.3 76.6 4.22 p. Safe Deposit Box 15.4 77.3 4.25 q. Factoring 12.3 79.0 4.33 r. Retirement Benefit Scheme 9.6 79.8 4.39 s. Investment Advice / Portfolio Management 7.9 84.1 4.46 t. Business Travel Services 3.6 87.1 4.57 u. Forfaiting 5.0 86.6 4.58 V. Post-dat^ Cheque Discounting 6.4 88.3 4.60 w. Management Consultancy 1.2 91.7 4.73 Notes : 1. (rated below 3 - frequently used, rated above 3 - less frequently used) 2. The percentages quoted were calculated using the number of respondents that had heard of the services as denominator. Traditional Banking Services It is logical that current account, remittance, saving account, foreign exchange and import/export financing are the most frequently used services. Current accounts are used to settle payments. Savings accounts are used to hold ready-to-use cash. Foreign exchange and remittance services are used to repatriate the locally earned revenue to parent companies or to settle payments with international business partners. 40 Import/export financing are frequently used as over two thirds of the sample firms are in the import/export and trading sectors. In the sample, no significant difference in the usage of foreign exchange and remittance service among companies in various sectors was observed. No significant difference in using import/export financing service and savings account was observed between companies in the manufacturing and trading/import/export sectors either. These two groups of companies, however, did use the savings account service less frequently and the import/export financing more frequently than others (mean rating 2.75, 2.19 vs 1.18 and 2.1, 1.91 vs 3.85 respectively). Corporate credit cards are targeted at larger companies. As in the survey, around 70 percent of the respondents had less than 100 employees, it is not unexpected that this service was less frequently used. The low usage is also attributed to the popularity of personal credit cards in Hong Kong. No significance difference in usage was observed among companies of various sizes in the survey. One possible reason is that the size of the respondent companies are still too small compared with the target companies of the service. New Banking Services Phone banking, which is mainly targeted at retail customers, got a higher rating (lower usage) as well. The difference in ratings given by companies of various sales turnovers or different sizes was statistically insignificant. Because of its limited capability, its low usage in the corporate sector is expected. However, some banks have marketed this service as the remote substitute of the more powerful electronic banking system which requires substantial capital investment. The market of Electronic banking is still in its introductory stage and it is primarily targeted at larger corporations. As mentioned before, only a few banks in 41 、 Hong Kong have offered this particular kind of service and no aggressive promotion has been done so far. It is not unexpected that only a few companies use this service. Significant difference was found between companies having sales turnover below HK$50 million and those above this figure. The former used less frequently than the latter. The mean ratings were 4.13 and 3.06 respectively. Companies having 50 or fewer employees used the service significantly less frequently. The mean ratings were 4.11 (less than 50) vs 2.94 (50 - 99 employees) vs 3.21 (100 or more). This may be attributed to the fact that electronic documents are not yet legally enforceable or tested in court. Moreover, the user's initial hardware investment and monthly rental to be charged could not be justified by the savings obtained from small transaction volume. Apart from these, it is also necessary to train staff to operate the system. Furthermore, the limited capability of existing communication network also makes the use of electronic banking inconvenient. Users need to have separate network connection for their telephone equipment and data terminals. The transmission rate is barely acceptable for transferring large volume of data. High speed data links can be used but they are too expensive for small companies. The gain could not be realized unless the daily transaction volume or the cash to be managed is large enough. Specialized Services It is interesting to note that companies in the manufacturing and trading/import/export sectors used the trade credit information services less frequently than others, perhaps they relied on the service from specialized firms instead. However, no such information could be obtained from the survey. Frequency of using financial information service was found independent of sales turnover. Whereas for investment advice and portfolio management services, those in the higher sales turnover group ($50 million or above) used it more frequently. 42 Logically, those having higher gearing should be more sensitive to financial information so as to manage their financial resources more effectively. However, no significant difference was observed between groups of different gearing ratio. Those having 50 percent or more gearing used the project financing/loan syndication service more frequently than the others (mean rating 3.8 vs 4.39). Factoring is a kind of banking service with which a bank finances and/or collects trade debts of the customers, i.e. the trader (creditor) assigns his right to receive money from his principal debtors to the bank. It is a form of financing mainly used in the trading business since receivables represent a major portion of traders' assets. It has been introduced in Hong Kong for over ten years. In the survey, the mean rating on usage frequency was quite high (4.39，i.e. less frequently used) and no significant difference in usage was observed among companies in the manufacturing and import/export/trading sectors. However, these two groups of companies used the service significantly more frequently than other groups. Moreover, the usage was significantly lower (more frequently used) among companies having gearing ratio less than 50 percent (4.59 vs 3.94). The low usage may be attributable to the fact that factoring is perceived as the last resort for external financing to be used only by companies in weaker credit position. Forfaiting, a supplier financing service for equipment purchase, is also a new means of fund raising for large projects. Its average rating of 4.58 in the survey indicates that its usage is quite rare in Hong Kong. However, its use among respondent companies in the manufacturing sector was significantly more frequent. No significant difference was observed among companies of various gearing ratios. As a matter of fact, those services that were rated above four, except safe deposit box which is targeted for retail customers, are not within bank's expertise. They are competing with agencies specializing in those areas. Nowadays, customers 43 demand for services that can be tailor-made to them and those agencies definitely have a vantage point over banks. To meet the competition, most banks have set up subsidiaries specializing in these areas to secure their position in the market. Awareness of Banking Services In the fast growing banking industry, banks compete not just on price basis, they also offer differentiated and/or specialized services to maintain market share. It was found that the respondents were not quite familiar with some of the services listed in the questionnaire. Apart from the fact that customers shop the specialized services from specialized agencies, the low usage of new banking services and specialized services may be due to the low awareness of respondents, who mainly pay attention to banks on traditional banking services. Table 4.7 shows, for each kind of service, the percentage of respondents who had never heard of it. 44 Table 4.7 Percentage Never Heard of the Services Percentage Never Services Heard Of a. Current Account 0.0 b. Remittance 0:0 c. Foreign Exchange 0.0 d. Savings / Time / Call Deposits 0:9 e. Imports / Exports Finance 2.8 f. Safe Deposit Box 4.9 g. Leasing / Hire-purchase 5.8 h. Electronic Banking Services 6.9 i. Post-dated Cheque Discounting 7.8 j. Trade Credit Information (banker's opinion) 8.7 k. Corporate Credit Cards 9.6 1. Phone banking 9.9 m. Insurance Services / Brokers 11.8 n. Financial Information Services 12.6 o. Swap Time Deposits 12.9 p. Trustee Services 12.9 q. Investment Advice / Portfolio Management 12.9 r. Project Financing / Loan Syndication 13.6 s. Management Consultancy 15.8 t. Business Travel Services 16.7 u. Retirement Benefit Scheme 16.8 V. Factoring 18.2 w. Forfaiting 37.5 Factors inducing bank switching Bank switching was in fact not quite common in the corporate sector. As mentioned previously, 60 percent of the respondent companies had maintained banking relationship with their most important bank for at least ten years and roughly 90 percent had not changed their main banks in the preceding two years. 45 Several factors were conceived to be causes of bank switching. The respondents were asked to identify how likely these factors had induced (would induce) their company to change the main bankers. The scale being used was a scale of one to five, with "r being most likely and "5" being most unlikely. The detailed results are depicted in Table 4.8. The fact that ratings for all factors were greater than two implies that none of the factors would definitely lead to bank switching. The belief that banks would help companies having long standing relationship with them in times of need may deter corporate customers from closing accounts with their main banks. Having better relationship with banks gives companies a higher chance of obtaining funds too. It is obvious that "better lending rate", "longer term financing", "larger credit limit with fewer collaterals" are favourable factors as companies could obtain financial assistance easier or cheaper. "Better connection with major place of operation" also gives them a more convenient channel in dealing financial transactions with overseas operations, and if the bank has branches in the major place of operations of the companies, inter-bank remittance charges in each transaction could be avoided. Quality of service is also one of the major considerations in deciding to switch their main banks. No significant difference was observed among companies of various sizes, sales turnovers and gearings. To summarize, most of the respondent companies did not want to rely on a single bank, 84 percent of them had maintained relationship with more than one bank. 46 Table 4.8 Factors Inducing Bank Switching % Rated % Rated Average Factors below 3 above 3 Rating a. Larger credit limits with fewer 67.9 21.4 2.21 collateral requirement b. New banker grants the companies 60.8 12.7 2.29 better lending rate c. Poorer quality of service provided 60.2 17.5 2.33 by existing banker d. New banker grants the companies 56.8 20.2 2.47 with longer term financing e. New banker has better connection with 55.7 19.2 2.56 countries of major operation of the companies f. Desire not to rely on a 51.4 20.0 2.67 single bank g. Availability of specialized services 26.3 47.4 3.44 from new banker h. New banker has better connection 25.2 52.4 3.49 with PRC i. New banker provides the companies with 17.7 52.0 3.60 better electronic banking services j. Attractive presentation by 19.2 59.7 3.72 new banker's account officer k. Recommendation / Instruction from 22.8 68.4 4.00 parent companies 1. Others 23.8 57.1 3.81 Note : rated below 3 - likely’ rated above 3 - unlikely Other factors seem to be not important in the bank switching decision. In particular, "Availability of Specialized Services", "New Bank has Better Connection with PRC", "New Bank Provides Better Electronic Banking Service", "Good Presentation by Account Officer" and "Recommendation/Instruction from Parent Company" received average ratings above three. 47 New Bank has Better Connection with PRC The average rating was 3.49. Slightly more than one fourth of the respondents expressed that their companies would change the main banker, i.e. rate two or below. Over 50 percent did not show preference to this factor. In particular, there were about 30 percent of the respondents found this factor most unlikely to induce them to change the banker. Nevertheless, significant difference was observed between groups with or without PRC interest. Those companies having investment in or trading business with the PRC showed higher preference, i.e. lower rating, for this factor (mean rating 3.19 vs 3.95). As revealed by this survey, multiple banking is common in Hong Kong. In case a particular company wants to have a bank with a better connection with the PRC, it can just set up relationship with a new bank without having to sacrifice the established relationship with its main banker. Although it is not sure whether this is actually happening, companies having PRC interest did have more bankers on average (Table 4.2). New Bank Provides Better Electronic Banking Service This factor was also quite insignificant irrespective of the company size or sales. The average rating was 3.6，with only 20 percent rated below three but having over 50 percent rate above three. The limited capability of electronic banking services available in the market and the fact that the savings harvested from having this service might not be great enough to justify the setup and running cost of the system may make this factor less important in the bank switching decision. 48 Recommendation/Instruction from Parent Company It seems that for multinational companies, the parent company hardly has any influence on the banking decision of its subsidiaries. The average rating for this factor was 4.2, with 65 percent of the respondents indicated that it would be very unlikely to change the main bankers just because of the recommendation/instruction from their parent companies. Only 20 percent indicated that it was a possible factor. Good Presentation by Account Officer Respondents were quite rational in choosing bankers. Nearly two thirds of them considered it as a less important factor. It seems that bank loyalty is not easily damaged by words and good presentation alone by account officers of another bank will not easily trigger a company to switch its own banks. As suggested by Turnbulpo, the effectiveness of direct selling has significantly declined since large number of banks are using such techniques and the experience of corporate treasurer has been enriched. However, positive "word of mouth" is still a crucial factor as revealed by File and Prince^i provided that the actual quality is good. Availability of Specialized Services Nowadays, customers are demanding specialized, tailor-made services. If a bank can provide specialized services that meet these needs, it can capture new 20 Turnbull, P W (1984). "The Use of Foreign Banks by British Companies" in Cheese, J (Ed), Insights in Bank Marketing, MCB University Press, Bradford pp 121-133. 21 File, K M and Prince, R A (1992). "Positive Word-of-Mouth: Customer Satisfaction and Buyer Behaviour," International Journal of Bank Marketing. Vol 10 No 1 pp 25-29. 49 customers and retain existing customers. However, in the survey, it could not be identified what specialized services the respondents really meant. It is worth to note that some respondents had mentioned "better and efficient connection with local banks" and "twenty four-hour services" would induce them to switch bankers. The Best Banks Respondents were asked to name the best, the second best and the third best banks in terms of the perceived quality of services provided in Hong Kong. The four important banks mentioned previously were also found to be the best among all banks named in the questionnaire. Over 37 percent rated HSBC as the best bank, 29 percent chose HASE. Each of the other banks received only barely 8 percent of the total rally. As the second best bank, 22 percent, 20 percent and 17 percent named HSBC, Standard and HASE respectively. Table 4.9 shows the weights received by the four best banks. A weight of three is given to banks having been named as the best bank, two to the second best, and one to the third best. It is worth to note that the BOC Group was ranked fourth and second in terms of quality of service and importance respectively while HASE was perceived to provide better quality of service (it was ranked second). 50 Table 4.9 The Best Banks Name Total Weight The Best Bank Hongkong Bank 168 The Second Best Bank Hang Seng Bank Ltd 129 The Third Best Bank Standard Chartered Bank 76 The Fourth Best Bank Banks of China Group 37 Note : A weight of three is given to the best bank, two to the second best and one to the third best. The total weight received by a bank is divided by the number of respondents who have named it to obtain the relative weight. Determinant Attributes of Banks / Banking Services Excluding Lending Policy The ratings of fourteen attributes about banks/banking services in terms of their importance for a bank to be the main banker of the respondent companies are tabulated in Table 4.10. A five-point scale was used, with "1" being very important, "5" not important at all. All except "Connection with PRC" were considered as important characteristics. 51 Table 4.10 Determinant Attributes of Banks/Banking Services Excluding Lending Policy % rated % rated Average Characteristics below 3 above 3 Rating a. Quality of Service 99.1 0.0 1.13 b. Operational Efficiency 99.1 0.0 1.17 c. Long Standing Relationship 78.2 3.6 1.79 d. Ease of Access to Bank's Branch / Service 76.9 4.6 1.82 e. Larger Size of Bank (Financial Strength) 76.7 4.6 1.84 f. Good Relationship with Account Officers 68.1 1.9 1.94 g. Wide Range of Services Provided 71.7 7.6 1.97 h. Bank's Reputation and Image 65.8 5.6 2.05 i. Friendliness of Bank Staff 63.9 6.5 2.12 j. Broad Knowledge of Bank Staff 62.1 8.4 2.19 k. Extensive International Branch Networks 62.6 12.1 2.19 1. Account Officer's Knowledge / 58.3 12.0 2.41 Interest in Company / Industry m. Availability of Electronic Banking System 47.2 28.3 2.70 n. Connection of Bank with PRC 29.9 30.9 3.07 Note : rated below 3 - very important, rated above 3 - very unimportant Quality and Efficiency Quality services (average rating 1.13) and efficient operations (average rating 1.17) were found to be the overriding characteristics. Knowledge of account officers and their interest in the company's area of specialization were commonly considered as important aspects. Banks providing quality services and efficient operations definitely have advantages over others. In the survey, nearly 85 percent of the respondents rated these two factors very important and nearly all of them rated this attribute below three, i.e. very important. 52 Relationship Long standing relationship with bankers was also desirable among companies of various sizes in different sectors, it received a mean rating of 1.79. It is conceived that once they have established relationship with their main bankers, they would hardly change the bankers because of the advantage of having long standing relationship with them and good relationship with the account officers. Fewer collaterals are required. In fact, relationship (or "kuan xi") plays an important role in the Chinese culture. It is believed that bankers with longer and better relationship are more likely to help the companies in hard times. This may explain why corporate customers seldom switch their bankers. Convenience of Access Ease of access was found to be an important characteristic too. In the sample, significant difference was observed between companies having less than 100 employees and companies having 100 employees or more. Smaller companies gave a lower average rating, i.e. more important (1.68 vs 2.15). The fact that this factor was not as important as quality and relationship suggests that there is a minimum requirement on this factor beyond which it becomes indifferent to companies, especially the larger ones which can afford the traveling cost and manpower, both in time and monetary terms. Image of Bank Companies showed favourable preference towards banks offering wide range of services. It is conceived that they prefer to obtain all services from one bank, providing them operational convenience (one-shop banking or supermarket as described 53 by Carey22). Banks with better financial strength and reputation are also attractive too (average ratings were 1.84 and 2.05 respectively). Companies can have higher confidence on such banks as they are perceived to be less likely to collapse, and thus can obtain more secured funding. Moreover, companies being backed up by such banks may be in a better position to negotiate with their business partners and in soliciting larger loans/credit lines from other banks. In the survey, no difference in preference was observed among companies of various sizes, gearings in different sectors. Electronic Banking Services Availability of electronic banking service was a moderately positive factor (average rating 2.70). The service could ease the respondent companies in managing funds and increase the accessibility of banking services. A lot of manpower could be saved too as users are now able to access banking services via terminals at their offices. The moderate rating of this factor may be attributable to the fact that electronic banking service is just in its introductory stage and only a few banks have provided such service to their customers. Connection of Bank with PRC Connection of bank with PRC seemed to be a less important factor for the whole sample. The rating would be positive for those having investment in/trading business with the PRC (mean rating 2.69 as compared to 3.72 for companies without PRC interest). This is consistent with the bank switching consideration mentioned in 22 Carey, T P A. Strategy Formulation by Banks. UK: MCB University Press Ltd, 1989. 54 the banking behaviour section earlier in this chapter that "PRC connection" is not an important factor. To be a main banker, the previously mentioned characteristics are more important. The requirement to have banks with PRC connection can be met by just opening a new account with a bank having PRC connection. Others In order to maintain a good relationship with corporate customers, a bank should be providing services of good quality with a high efficiency. The bank's image as reputable, financially strong and friendly are important as well. Besides, broad knowledge of bank staff and their interest in the company and its industry were also welcomed by the respondents as it may give them confidence that their banks have better understanding of their business needs. Determinant Attributes re Bank's Lending PoliVy Regarding the lending policy, the preference of respondents are listed in Table 4.11. The scale used was a five-point scale, with "1" denoting very important, "5" not important at all. The results indicate that all the characteristics regarding the lending policy are positive attributes. Some of the attributes are, in fact, sources of easy credits or cheap funds, except the attribute "stable and persistent lending even if conservative and stringent". There is no information from the survey as to why the respondents also rated this factor as important. This attribute may have psychological significance. Customers can be assured that their bankers will not abruptly change their credit lines, and their funds are rationally managed. Interesting enough, the respondents did not care whether personal guarantee/financial information was required, banks can 55 therefore actively impose these requirements to safeguard their risk without much worry. In the sample, no significant difference among companies of any kind was found. Table 4.11 Determinant Attributes of Banks / Banking Services re Lending Policy % rated % rated Average Lending Policy below 3 above 3 Rating a. Low Pricing/Interest/Charges 83.8 2.9 1.57 b. Flexibility in Structuring Lines 82.4 0.9 1.65 c. Fast Decision Making 86.7 2.0 1.71 d. Stable and persistent Lending even if 72.8 2.9 1.85 Conservative and Stringent e. Fewer Collateral Required 71.8 7.8 2.00 f. Aggressive Lending Policy 64.7 9.6 2.14 g. Personal Guarantee not Required 54.8 17.4 2.39 h. Financial Information not Required 33.6 27.8 2.94 Combining the results in Table 4.10 and Table 4.11, the top ten determinant attributes of banks that a corporate customer considers in choosing a main bank are summarized in Table 4.12. Quality, efficiency and pricing are the three most important attributes. 56 Table 4.12 Determinant Attributes of Banks and Banking Services n . Average Determinant Attributes Rating a. Quality of Service 1.13 b • Operational Efficiency 1:17 c. Low Pricing/Interest/Charges 1:57 d. Flexibility in Structuring Lines 1.65 e. Fast Decision Making 1.71 f. Long Standing Relationship 1.79 g. Ease of Access to Bank's Branch / Service 1.82 h. Larger Size of Bank (Financial Strength) 1.84 i. Stable and persistent Lending 1.85 even if Conservative and Stringent j. Good Relationship with Account Officers 1.94 57 CHAPTER V LIMITATIONS OF THE STUDY In carrying out the study, the following considerations had been taken into account. Non-Response Bias In the survey, a total of 500 questionnaires had been sent. However, only 112 completed questionnaires were returned. Non-response rate was as high as 78 percent. It could not be assured that those not responded had the same opinion as those responded, non-response bias would exist. However, such bias cannot be avoided in a mail survey which is expected to have a typical response rate between 10 percent and 15 percent. Non-response rate had been minimized. Advanced notices had been used to arouse the sampling units' interest before the questionnaires were sent. The response rate was significantly raised to 22.4 percent. Although the mailing list came from the 1992 membership list of the Hong Kong General Chamber of Commerce, a particular sampling unit might have been dissolved or relocated at the time the survey was conducted. Out of 500 questionnaires sent, five (1 percent) had been returned by the Post Office because the addressees could not be reached. The effective response rate should be marginally higher than 22.4 percent. 58 Another cause of non-response was refusal. A particular sampling unit might refuse to participate in the survey. This kind of self selection bias is common in a mail survey. Those recipients who were not involved in the financial management of their respective companies might be less enthusiastic to respond than those who were. Response Bias Length of Questionnaire The questionnaire though not too long, included many items that the respondents had to think about before answering. Respondents who became bored might recklessly give incorrect answers. The reliability of the answers to questions in later part of the questionnaires might be in doubt. The design of the questionnaire had taken this factor into consideration. Important information about banking decision was collected in earlier parts of the questionnaire and only demographic data were asked in the last section. Unconscious Misrepresentation Unconscious misrepresentation was possible as well, especially in rating the importance of various factors/characteristics etc. They might answer without giving careful thoughts. This was evidenced by the fact that some respondents even marked •Never Heard Of for some of the traditional banking services such as safe deposit box. Moreover, the questionnaires might be completed by personnel not involved in the financial decision/management of the companies. The information they provided might not fully represent the actual situation faced by their companies. Furthermore, since it 59 was a self administrated survey, each question was subject to the respondent's own interpretation. Restricted Information Set of Respondents The banking industry has become more competitive. Banks compete by offering better price and/or differentiated products. However, respondents might be quite unaware of some of the banking services, especially those new or specialized ones. One possible reason is that they are not sensitive enough to what is happening in the banking industry. As the information set of the respondents is quite restrictive, the use of survey method may not be so powerful to gauge the acceptance of a new type of product/service or a product/service that is changing rapidly, such as electronic banking service. Sample Selection Bias Sampling Frame Error The target population included all the companies in Hong Kong. However, the membership list of the Hong Kong General Chamber of Commerce had been used in drawing the sample. This sampling frame did not include all members in the target population and it would result in sampling frame error which could not be avoided. 60 Random Sampling Error The sample was randomly selected from the membership list of Hong Kong General Chamber of Commerce. This randomness caused an imbalance in the number of companies selected from each industry sector. Over 80 percent of the respondents came from the trading/import/export sector. Language Used in Questionnaire The questionnaire was designed in English and was subsequently translated into Chinese. Both versions were sent to the sampling units. The interpretation of some questions in a Chinese context might be different from the original meaning. Among the 112 respondents, 11 had chosen to use the Chinese version and one had answered part of the questionnaire in English but subsequently changed to use the Chinese version. 61 CHAPTER VI COMPARISONS OF STUDIES In this chapter, the results of this study will be compared with five other studies carried out earlier by other scholars both in Hong Kong and other parts of the world. These studies are: Study A : Turnbull, P W (1983). "Corporate Attitudes Towards Bank Services," in Cheese, J (Ed), Insights in Bank Marketing. MCB University Press, Bradford pp 94- 104. The study focused on identifying the relationship which existed between medium-sized domestic companies (annual turnover £1 million to £15 million) in the United Kingdom and their sources of financial services. Forty-four sampling units were chosen in the Greater Manchester area in England, using personal interview as the sample polling method. Study B : Turnbull, P W (1984). "The Use of Foreign Banks by British Companies," in Cheese, J (Ed), Insights in Bank Marketing• MCB University Press, Bradford pp 121- 133. The research examined the environmental conditions which contributed to the use and growth of US Banks in the United Kingdom and the bank selection criteria of large corporate customers which had annual sales turnover ranging from £21 million to over £10,000 million. Thirty companies were randomly drawn from the Times top 1000 companies. Personal interview was used. 62 Study C : Turnbull, P W and Gibbs, M J (1989). "The Selection of Banks and Banking Services Among Corporate Customers in South Africa," International Journal of Bank Marketing. Vol 7 No 5 pp 36-39. The main objective of the study was to investigate the relationship which existed between banks and companies, and their selection criteria. Sampling units were companies with annual sales turnover around £6 million located in Witwaterstrand area in South Africa. The sample size was 388 and mail survey was used. Study D : Rosenblatt, J, et al (1988). "Commercial Banking in Canada : A Study of the Selection Criteria and Service Expectations of Treasury Officers," International Journal of Bank Marketing. Vol 6 No 4 pp 19-30. The study tried to identify the decision maker in the bank selection process, the determinant attributes and the attitude of corporate customers towards banking services. Mailed survey was used and the sample size was 170 companies. Most of them were firms with revenue over CAD200 million and more than 1,000 employees. Study E : Chan, K K, and Ma, S M (1990). "Corporate Banking Behaviour: A Survey in Hong Kong," International Journal of Bank Marketing, Vol 8 No 1 pp 25-31. The research studied the banking behaviour of corporate customers in Hong Kong, their attitude towards banks and their awareness of financial services in 1987. Because of the difference in cultures and business environments of the sampling units in the first four studies, direct comparison with this study sheds light on the differences in banking behaviour of customers across countries. The comparison of 63 Study E with this study will show how customer's attitudes towards banks and banking services have evolved over time. Studies in Other Parts of the World Bank Usage Despite the difference in sizes of the target companies, multiple banking was observed in Studies A to D and this study (see Table 6.1). In Study A, a majority of the respondent companies kept only one bank (59 percent) whereas in Study C and this study, only 13 percent and 16 percent kept one bank despite the fact that bank loyalty was found to be extraordinary high - 84 percent and 60 percent of the respondent companies respectively had never changed their main bank in the preceding ten years. Multiple banking was more prominent in Study C and this study. Such detailed information was not available in Study B and Study D. Interestingly enough, a direct relationship was found between sales turnover of the company and the number of banks used in studies A, B, C and this study. In Study C, Turnbull and Gibbs identified that the reasons for keeping multiple banks were either specialized skills or level of efficiency not available from main banks. No such information was available from this study. However, it is believed that the same reasons apply to Hong Kong. Moreover, keeping multiple banks has the advantage that unfulfilled needs for credit lines from one bank can be satisfied by other banks. 64 Table 6.1 Comparison of Multiple Banking Behaviour (Geographical Difference) This Study Study A Study C Having 1 bank 16% 59% 13% 2 banks 32% 32% 36% 3 banks 19% 7% 35% 4 or more 33% 2% 16% Note : No such information was available in Studies B and D. However, Study B quoted that on average^ companies of various sizes in the United Kingdom used 8.06 banks at the time of study. Study D found that around 72 percent of the respondents used only one primary financial intermediary for majority of their banking transactions. The decision to choose a particular bank was found to be quite centralized in Study D and this study. In the former study, 70 percent of the financial officers responsible for selection of banks were either corporate treasurers, treasury managers or the board of directors. And in this study, the decision was mostly made by either company's owner, the chairman of the board or the chief executive officer (83 percent). Use of Foreign Banks It was found in Study A, which targeted at medium size companies of annual turnover £1 million to £15 million in the United Kingdom, that only 12 percent of the companies had maintained an account with a foreign bank. Whereas in Study B, 26 percent of the respondents (large companies with annual sales turnover over £21 million) in the United Kingdom kept an account with foreign banks. In this study, a much higher percentage (49 percent) was found. In Study B, Turnbull found a limited 65 relationship between use of foreign banks and international exposure of a company. He suggests that company's experience in dealing with foreign banks through its subsidiaries overseas would result in increased usage of foreign banks. In this study, about 49 percent of the respondents quoted places other than Hong Kong as their major places of operation. This high level of international exposure of the respondent companies can be construed as one reason for the high percentage of companies having foreign banks as one of their important banks. Besides, at the end of 1992, out of 164 licensed banks operating in Hong Kong, 134 banks are incorporated overseas. Corporate customers are having a wider exposure to foreign banks. Usage of Financial Services In Study A, main banks were found to be main sources of short term finance and import/export finance. Other specialized services such as management consultancy, insurance services and hire purchase etc were obtained from financial institutions other than banks. Respondents showed a clear preference to obtain such services from specialized organizations. Respondents in Study D also showed such a preference because of the belief that specialists in each area offered higher quality of service. In line with the findings by Turnbull and Rosenblatt, specialized services were also found to be rarely used in this study (see Table 4.5). Determinant Attributes of Banking Services Quality was found to be the most important attribute of banking services in Studies B, C and D and this study. The four most important attributes in order of importance in various studies were shown in Table 6.2. Banks' image, reputation and convenience of access were less important. In Study C, Turnbull and Gibbs suggest 66 that these factors are minimum requirements that a bank must meet before customers take the bank into consideration. Table 6.2 Comparison of Determinant Attributes of Bank / Banking Services in Decreasing Order of Importance (Geographical Difference) This Study Study B Study C Study D 1. Quality of Quality of Quality of Efficiency Services Services Services of Services 2. Operational Competitive Relationship Reliability Efficiency Terms of Service 3. Low Pricing / Rapid Decision Quality of Staff Responsiveness Interest / Making of Contact Charges Persons 4. Flexibility in Commitment to Ability to Service Delivery Structuring the Company Obtain Finance Lines Note : Reliability and efficiency are also attributes of quality. The pursuit of quality services by customers elsewhere reveals that quality is a common attribute everybody looking for in every product or service. It receives even more attention than pricing. In this study, no significant difference was observed among companies of various sizes towards pricing of services. Large companies, however, were found to be more price sensitive and only in traditional banking service was price a factor in the selection process among small companies in Study C. 67 Summary Despite the difference in geographical locations, multiple banking is common, though to a different extent. A direct relationship exists between the sales turnover of a company and the number of banks used. Moreover, corporate customers select their bankers based on more or less the same criteria. Quality is of utmost importance. Study of K K Chan and S M Ma Chan and Ma's Study (Study E) was carried out in 1987 in Hong Kong, with target population as members in the 1986 Membership List of the Hong Kong General Chamber of Commerce. The sampling frame was the same as this study. Bank Usage In Study E, the three most popular banks were HSBC, Standard Chartered and HASE. In this study, HSBC was still the most popular bank due to its dominant presence in the territory. The second most popular bank was the BOC Group, followed by Standard Chartered. The change in ranking could be conceived as a rise in the importance of the BOC Group in the market place. It may be explained by the change in marketing strategies of the BOC Group since mid 80's^^. The 13 sister banks have collaborated to strengthen the group's position in the market under the control of the Hong Kong and Macau Regional Office. This change brought about a drastic change in the group's share of the market. 23 Scott, R H, Wong, K A, and Ho, Y K. The Hong Kong Financial System. Hong Kong: Oxford University Press, 1991 p 1. 68 Consistent with Study E, smaller local Chinese banks played an important role as third tier banks. The dominance of the four most popular banks was weakened. Chan and Ma commented that the use of the four most popular banks as most important bank(s) made good commercial sense as these banks had well-developed branch networks. Those smaller local banks provided the companies with specialized services and fulfilled those banking needs which could not be met by larger banks. Multiple Banking Multiple banking was observed in Study E and this study, however, the degree varied (Table 6.3). Table 6.3 Comparison of Multiple Banking Behaviour (Time Series) Number of Banks This Study Study E Having one bank 16% 17% Having two banks 32 % 23 % Having three banks 19% 25% Having four or more banks 33% 35% In this study, a direct relationship between either the number of years since incorporation or the size of company and the number of banks used was observed. Companies having interest in the PRC also maintained more banks. 69 An earlier study by Chan and Ma^^ in 1984 on the Hong Kong's manufacturing sector revealed that the number of banks customers had was mostly two or three (36 percent and 33 percent respectively). This is consistent with this study in which nearly 40 percent of the respondent companies in the manufacturing sector held accounts with two banks, (see Table 4.2) Bank Switching Consistent with Study E, the banking relationship revealed in this study appears to be quite stable. Both studies showed that over 80 percent of the respondents had not switched their main bankers within the preceding two years. Since relationship is very important in day-to-day business, companies would seldom close accounts with their banks but would switch the emphasis to other banks. The four main reasons for leaving a main banker in order of priority were listed in Table 6.4. Companies leave their main banker mostly because of monetary reasons. Quality of service is important but the ability to reduce banking costs is important as well since keeping cost down means higher profit margin. 24 Chan, K K, and Ma, S M (1987). "Hong Kong Companies' Attitudes Towards Banking and Financial Services: A Survey Approach in the Manufacturing Sector," The Hong Kong Manager. Vol 23 No 5 pp 17-30. 70 Table 6.4 Reasons for Leaving Main Banker (Time Series) Priority This Study Study E 1 Larger Credit Limit Quality of Service 2 Better Lending Rate Expand Borrow Facilities 3 Quality of Service Variety of Services 4 Longer Term Financing Better Relationship with banks' executives Bank Selection Criteria To choose new banks, the quality of service provided by banks, operational efficiency, convenience of access, banks' reputation, account officers' knowledge, pricing policy are all considered as important attributes in both studies. A comparison of importance of various attributes considered as important for main bankers is shown in Table 6.5. The trend is that quality and efficiency have become more significant in making a buying decision. Other factors, even pricing, are slightly less important. In Study E, the PRC connection was considered as an unimportant factor. In this study, however, it was discovered that for companies having interest (either investment or trading business) in the PRC, the factor became more favourable. Those attributes relating to lending policy identified in Study E were also considered as important attributes in this study. However, their rankings were a bit different. Pricing is still considered as the most important attribute. One interesting point to note is that the respondents, though preferred their banks to be aggressive in lending, showed a higher preference to stable and persistent lending even if conservative and stringent. The former factor was given an average rating of 2.14. In 71 fact, the latter factor can assure customers that their credit lines will not be changed abruptly. The higher rating (less important) given to the "fewer requirements on collaterals" allows banks greater room in imposing more requirements to minimize the credit risk. Table 6.5 Comparison of Most Important Bank Attributes (Time Series) This Study Study E 1 Quality of Service (1.13) Operational Efficiency (1.17) 2 Operational Efficiency (1.17) Interest Charge (1.23) 3 Low Pricing (1.57) Reputation (1.41) 4 Flexibility in Structuring Lines (1.65) Financial Strength (1.42) 5 Fast Decision Making (1.71) Aggressive Lending (1.53) 6 Long Standing Relationship (1.79) Account Officers' Knowledge in Company's Business (1.55) 7 Ease of Access (1.82) Friendliness (1.60) 8 Financial Strength (1.84) Collateral Required (1.72) 9 Stable and Persistence Lending Personal Guarantee Required (1.79) even if Conservative and Stringent (1.85) 10 Fewer Collateral Required (2.00) Financial Information Required (1.86) Note : Figures in parentheses are mean ratings. Readers should note that Likert scales with six options (extremely unimportant, very unimportant, unimportant, important, very important, extremely important) were used in Study E. Use of Financial Services At the time Chan and Ma carried out their study, corporate customers were found to be infrequent users of financial services provided by banks, with the exception of import/export financing. The same finding was revealed in this study. However, the average ratings were higher (less frequently used) than before (Table 6.6). The 72 trend may be due to the increasing demand for specialized, high quality services by customers, which banks no longer have any significant competitive advantages over specialized agencies. Table 6.6 Use of Financial Services (Time Series) Priority in Priority in Financial Services This Study Study E Import / Export Finance 1 (2.32) 1 (1.88) Corporate Credit Cards 2 (3.46) 3 (3.29) Financial Information Services 3 (3.77) 6 (4.17) Leasing / Hire-Purchase 4(4.14) 5(3.93) Insurance Services 5 (4.22) 2 (2.99) Business Travel Services 6 (4.57) 4 (3.79) Management Consultancy 7 (4.73) 7 (4.33) Note: Figures in parentheses are mean ratings (high rating means less frequently used). In Study E, a six-point scale was used with "1 “ denoting not used at all and "6" often used. The mean ratings in Study E were adjusted such that they were fitted into the five-point scale used in this study. The readers should bear this in mind in reading the tables. Moreover, in the table above, only those factors included in both studies were compared. Summary As time evolves, both the banking industry and customers' attitude change. HSBC is still the most popular bank, but the rankings of other banks such as HASH, Standard and the BOC Group have changed. Local Chinese banks still play an important role as third tier banks. Multiple banking is still prominent despite the fact that source loyalty remains high. Quality is now considered as the most important attribute of banks/banking services. In fact, some of the largest banks have started 73 total quality management〗； programmes to enhance their quality as well as image. Operational efficiency and low pricing are still given high attention in choosing main banks/banking services. Lastly, usage of specialized services from banks is getting lower. 25 Total Quality Management (TQM) is a management approach based on participation of all members of an organization in improving processes, products, services, and the culture they work in. The ultimate objective is to meet customer requirement right the first time every time. 74 CHAPTER VII RECOMMENDATIONS Table 7.1 The Marketing System - A Model Competitive Profile Market Profile Customer Profile Company/Product -Strengths and - Market Size - Customer Attitudes Profile Weaknesses - Market Shares Image - Own Strengths -Direct Competitors - Demographics - Why buy and not buy and Weaknesses -Indirect Competitors and Trends - Buying Decision - Company -Michael Porter's - External Making Process Capability Five Market Forces Environment - Buyer, Influencer - Product and Users CapabiIity 1 i I Market Segmentation 1 i I Marketing Objectives For Each Target Market 1 i I Product Price Promotion Place Objectives Objectives Objectives Objectives _— 1 A I Marketing Strategy 1 i I Product Price Promotion Place Strategies Strategies Strategies Strategies — 1 1 I Control and Feedback (also Budget) 75 After the detailed analysis of the survey findings and the comparative study, a better idea on how corporate customers view banks and banking services in Hong Kong and other parts of the world is obtained. To formulate marketing strategies systematically for a particular bank, the following information is required : competitive profile, market profile, customer profile and the bank's own company profile (Table 7.1). This study provides only a handful of information for a bank to compile a customer profile and to a lesser extent a market profile. Nevertheless, a customer profile is inevitably a major constituent in formulating the appropriate marketing strategies for different banks. The discussion in this chapter will focus on recommendations in the following areas : market segmentation, market positioning and the 4 P,s of marketing strategies, i.e. product, price, promotion and place. Finally a number of valuable findings on banking behaviour of corporate customers and recommendations will be highlighted. Market Segmentation Commercial banks traditionally developed their business through their branch networks. A branch bank becomes a gateway of all types of bank business ranging from personal services to corporate customer services. Because of the intense competition among banks since the mid 80's, banks have become more marketing oriented. Owing to limited resources and expertise, banks are advised to concentrate on a market segment which presents opportunities and threats that are best matched to their strengths and weaknesses. Market segmentation is in fact a necessary strategy to sustain growth of profitability and to maintain market share. Turnbull and Gibbs state that corporate customers of banks are typically segmented on the following bases : type of industry (manufacturing, mining etc), size of organization (in terms of corporate 76 turnover or capital employed etc.) or geographic location (physical locality)^^. Martin suggests to segment the market according to relative sophistication of the financial function of a firm27. File and Prince even propose segmentation by stage in business life cycle (i.e. age of the firm) or by sociographics^s. Due to the small size of the territory, banks in Hong Kong are normally found to employ the firm size and/or the industry type to segment their corporate customers. For major banks such as HSBC, the BOC Group, Standard and HASE, suitable market segmentation strategies should be formulated in order to achieve the best return from the existing and potential customers. If the total account portfolio is large enough, a mixed segmentation by both industry and company (or group) size can provide more flexibility to the customers, wider differentiation of products/services and deeper understanding on the customer's business. Although there is a growing trend that different banks are focusing on satisfying more customers' needs, the small business sector has often been neglected by major banks. From Table 4.4, local banks other than HSBC, Standard and HASE were considered to be more favourable by smaller companies, this presents a good opportunity for these banks to compete in this market segment. Niche marketing is another way to survive, in fact, some foreign banks are providing very specialized landings such as gold leasing or commodity trade financing etc. 26 Turbull, P W and Gibbs, M L (1987). "Marketing Bank Services to Corporate Customers: The Importance of Relationships," International Journal of Bank Marketing, Vol 5 No 1 pp 19-26. 27 Martin, D (1986). "Tracking the Elusive Middle Market," The Bankers Magazine. Sep-Oct 1986. 28 File, K M and Prince, R A (1991). "Sociographic Segmentation: the SME Market and Financial Services," International Journal of Bank Marketing, Vol No 3 pp 3-8. 77 Market Positioning A customer profile helps to develop a more meaningful marketing strategies for banks. Derived from Table 4.4, the following preferences by corporate customers on the importance of banks are observed (Table 7.2). Table 7.2 Market Segmentation Size Gearing Interest in PRC Hongkong and Shanghai Large < 50% No Interest Banking Corporation Ltd Bank of China Group Small > 50% Have Interest Standard Chartered Bank Medium to Big > 50% No Interest Hang Seng Bank Ltd Small to Medium < 50% No Interest Other local Banks Small unknown unknown The table indicates only some of the classifications of companies banks may follow in order to position themselves in the target market segments. The level of gearing of companies may indicate the perception on the aggressiveness of the lending policy of a bank. In addition, banks should evaluate their positions in the market place by using tools such as Strength-Weakness-Opportunity-Threat analysis. For market leaders such as HSBC, BOC and to a lesser extent Standard and HASE, it may be more appropriate to formulate marketing strategies for maintaining the market share to avoid any cut- throat competition. For smaller banks, they should find out whether there is any niche market that can be matched by their special strength e.g. cheaper funding, country of domicile or special knowledge in a specific industry or trade. 78 Although customer loyalty is quite strong, multiple banking is very common in Hong Kong. Banks should not expect any dictatorship in the relationships with customers as they know the market quite well. It may be considered as good news for smaller banks which may establish relationship with a company quite easily. However, it may not be able to secure a significant portion of the business from the customer. Most successful relationship strategy may be to provide a larger facility limit with cheaper pricing, longer term and better quality of service. But this should be weighted against the credit risk involved. Marketing Strategies Product As corporate products are quite homogeneous, the most important strategy is to emphasize on the quality and efficiency of services which are perceived by corporate customers to be as the most determinant attributes. Flexibility and speed come second in the most important determinant attributes, so banks should put stronger emphasis on quality improvement. Bank staff, to a larger extent, can be considered as an integral part of the product (bank service) being delivered to customers. Staff performance and behaviour greatly affect the perception of service quality. In Table 4.10，the four attributes related to bank staff, viz, good relationship with account officers, friendliness of bank staff, broad knowledge of bank staff and account officer's knowledge/interest in company/industry were perceived as important by the respondent companies. Banks should ensure that each position is filled by capable staff. 79 Apart from this, banks have been developing new products and services to corporate customers to satisfy their needs. More personalized services or electronic banking systems are some of the examples that banks are trying to differentiate the package of products available to the customers. Price As mentioned before, corporate banking sector has been highly competitive in the absence of excessive regulation by the government. Pricing is perceived as very important in the minds of most companies in selecting a bank. To avoid cut-throat competitions and together with the Basle Agreement on minimum capital adequacy ratio, banks in Hong Kong are becoming more restrained in lowering the price further. Instead, most banks now compete more on non-price items such as quality of service. Price/product differentiation is a good strategy to achieve optimal returns from different classes of corporate customers. Promotion Image of a bank is very important as banking is largely based on trust and perceptions. Most companies consider a long standing relationship, strong financial strength of a bank and stable and persistent lending relationship to be important attributes in choosing a bank. Quality is of extreme importance as well. These are the values or attributes that banks should try to emphasize in promoting their image. A number of channels for promoting images and/or products are available such as (a) advertisements in business magazines, trade journals and newspapers etc., (b) direct mailing or telemarketing, (c) personal selling by relationship managers/account managers complemented by specialized sales force, (d) "word-of-mouth" by satisfied 80 customers. File and Prince suggest that positive "word-of-mouth" surrounding a financial services provider is a crucial factor taken into account by corporate customers in selecting a financial services provider^^. Therefore, it may be beneficial for the bank's relationship manager to encourage voicing out of positive feelings by the satisfied customers through frequent interactions and scheduled meetings. He should even ask for and follow up referral to other customers given that the actual service quality is good. , Place Apart from branch networks that deliver the essential banking services, corporate customers are served by account officers/relationship managers that may be stationed in branches or in corporate banking centres (for some banks). Ease of access to bank's branch/services is perceived to be important attribute in choosing a bank. Banks should provide a sufficient coverage of service centres (corporate banking centres or branches) so as to satisfy most customers' needs. However, the expansion of networks has a limit as it is expensive and the improvement in customers' satisfaction is diminishing marginally. Another way to increase the accessibility is to provide customers with electronic banking system, which is a delivery system in essence. On the delivery side, most banks are adopting the relationship banking concept. Relationship manager provides a key interface for a customer to deal with his banking needs. Although account officer's knowledge on the banking services and the customers' businesses is considered not as important as in the past, banks should 29 File, K M and Prince, R A (1992). "Positive Word-of-Mouth: Customer Satisfaction and Buyer Behaviour," International Journal of Bank Marketing. Vol 10 No 1 pp 25-29. 81 nevertheless equip the account executives with better training so as to provide superb quality of services. The above recommendations are not meant to be exhaustive as all necessary information on competitor banks and a particular bank itself in order to formulate the marketing strategies has not been compiled. However, it shows the way a bank may follow to better define its position and formulate more effective marketing strategies for its unique situation. Other Recommendations Banking - An Important Decision Decision to choose or use a bank is perceived to be an important issue for a company. For more than 83 percent of the respondent companies, the decision is made by their owner, chairman or chief executive officer. This centralized decision making indicates that a bank should organize its sales force effectively to hit the right person at the right time on an on-going basis. Turnbull and Gibbs suggest to implement relationship banking or account relationship management ("ARM") strategy so as to increase the bank's market share and profitability^o. Moriarty, Kimball and Gay define relationship banking as a recognition that the bank can increase its earnings by maximizing the profitability of the total customer relationship over time, rather than by 30 Turnbull, P W and Gibbs, M L (1987). "Marketing Bank Services to Corporate Customers: The Importance of Relationships," International Journal of Bank Marketing, Vol 5 No 1 pp 19-26. 82 seeking to extract the most profit from any individual product or transactional. Banks should provide resources and extensive training to the relationship managers in areas such as relationship planning, competitor analysis and negotiation skills etc so as to enhance the chance of success. Popularity of Multiple Banking Despite High Degree of Source Loyalty I With 84 percent of the respondent companies maintained banking relationships with two or more banks, it shows that the corporate banking market can be very competitive if alternative offers are available. This creates a good opportunity for pursuing aggressive marketing of credit or non-credit services against the leading banks especially for smaller and/or foreign banks in Hong Kong. On the other hand, leading banks are required to devise some defensive mechanisms such as improving service quality and maintaining good relationship at all times, so as not to lose any market share to competitors. In addition, the size and age of a company, and having PRC interest are found to be positively correlated with multiple banking behaviour. Banks should adjust their targets accordingly. Quality of Services and Competitiveness Quality of services is considered as the most important determinant attribute in choosing a bank. Its paramount importance indicates that banks should strive for improving its service quality continuously. As services provided by banks are intangible and involve the customers in the service delivery, service quality depends on 31 Moriarty, R T, Kimball, R C，and Gay, J H (1983). "The Management of Corporate Banking Relationships," Sloan Management Review. Spring 1983, pp 3- 15. 83 Staff who need to be perceived as knowledgeable, presentable and competent�� Hence. , extensive training is required. Secondly, a bank may commit and implement the total quality management concept (see footnote 25 in page 73) in order to bring the corporate culture in the right direction of continuous improvement of service quality. Thirdly，electronic banking service which is fast, cheap and safe may be an alternative delivery channel to improve service quality. Although it is found to be a positive determinant attribute in choosing a bank, its lesser importance as compared to other factors may be explained by the young age of the product. With better promotion, suitable education and adequate back up services such as maintenance and training support, electronic banking service is surely a good delivery channel of banking services33. Specialization of Services Traditional banking services such as current account, remittance, savings/time/swap deposit, foreign exchange and import/export finance are the most frequently used. But the usage of non-traditional banking services such as insurance, leasing and management consultancy is found to be lower than previous studies. The perceived specialization of services by customers may imply that banks should provide the non-traditional services via different entities and/or corporate images. One way of doing it is to form a number of subsidiaries to perform the functions professionally in a specialized manner. 32 Michell, P，and Lung, L (1989). "Where US Banks Need Marketing Training," International Journal of Bank Marketing. Vol 7 No 1 pp 28-32. 33 Lewis, B R, and Hoel, K E (1987). "Corporate Attitudes towards Electronic Banking in Norway," International Journal of Bank Marketing. Vol 5 No 4 pp 59-71. 84 "Connection" of Bank with PRC Connection of bank with the PRC is found to be a less important criterion for a company to choose a bank. Thus, contrary to some common beliefs among banks, banks especially local and smaller banks without any connections with the PRC (e.g. branch networks) are not perceived as inferior to PRC connected banks. However, connection of bank with the PRC is considered as a positive attribute in selecting banks for those companies having investment in the PRC. As more and more companies are relocating their production or sales to the mainland, local banks should consider whether the strategies such as setting up branches in the PRC or forming strategic alliance with the PRC banks should be pursued. In the PRC, setting up each branch requires a license from the PRC government, however, the number of licenses granted are limited. Banks should persuade the PRC government for more licenses. Emergence of BOC Group BOC group has become more prominent in the Hong Kong market34. Although it was ranked the fourth in terms of service quality, it was considered to be the second most popular bank in this survey. With its perceived strength in the PRC market, the BOC group is expected to emerge as another top bank group in Hong Kong or even the Asia Pacific region. However, its image is still perceived as conservative and political. Its potential may be realized if the corporate image is suitably changed and promoted accordingly. 34 Ho, S C, and Chan C F (1988). "The Bank of China Group in Hong Kong: An Awakening Giant," International Journal of Bank Marketing. Vol 6 No 5 1988. 85 Lending Policy of a Bank As expected, low pricing, flexibility, fast decision, fewer collateral requirement are viewed as positive attributes in selecting a bank. But interestingly, it is found that "stable and persistent lending even if conservative and stringent" was rated as important and the respondents did not mind the banks' requirements on personal guarantee and divulging their financial information. Banks should therefore not hesitate to demand for these so as to safeguard their credit risks. Furthermore, it may be a good marketing strategy to portray a conservative instead of aggressive image of the bank. Directions for Future Research This study focused mainly on identifying customers' attitude. Formulating sound strategies requires information on the characteristics of the bank market, the nature and intensity of competition and the bank itself. Further research can focus on identifying the market characteristics. This gives banks a clearer picture on how the market will evolve and the opportunities and threats it presents. In recent years, many companies have started to set up operations in the PRC. This rapid growing PRC market may present an opportunity to banks in Hong Kong. A study to identify changes, if any, of customers' attitudes on PRC connection of banks will shed light on the opportunities presented by this trend. The change may also be accompanied by a change in the perceived image of the BOC group as well. Furthermore, electronic banking service has been identified as a determinant attribute in the bank selection process, a study on customers' attitude towards electronic banking service in Hong Kong will help banks to evaluate the effectiveness and market potential of the service. Such a research can focus on identifying the awareness, interest and usage of electronic banking service, customer perception and preference. 86 CHAPTER VIII CONCLUSIONS This study aims at finding out the changing attitude of corporate customers towards banks and banking services in Hong Kong and recommending some useful strategies for banks. The approach used is entirely judged from the customers' perspectives. A bank may find it useful in formulating marketing strategies. However, the situation that a bank is facing may be completely different from that of the others. So, banks should apply their own judgment in making use of the findings and recommendations of this study. Nevertheless, the study is useful to reveal corporate customers' attitude. Multiple banking is very common in Hong Kong and that has not changed for the last decade. Customers are still very loyal to their corporate bankers. Customers may choose to use an additional bank rather than switch out of the entire relationship with the existing banker(s). Larger unsecured facilities at cheaper prices may be an attractive attribute that tempts a corporate customer to establish a banking relationship. The banking services that are most frequently used are current account, remittance, savings/time/swap deposit, foreign exchange and import/export finance. The top ten bank selection criteria are quality of service, operational efficiency, better pricing term, flexibility in structuring facilities, fast decision making, long standing 87 relationship, ease of access to bank, larger size (stronger financial strength) of bank, stable and persistent lending even if it is conservative and stringent, and good relationship with account officers. All of the findings are important factors for a bank to consider in formulating a suitable marketing strategy in the Hong Kong corporate banking market. 88 LIST OF APPENDICES Appendix 1 Advanced Notice Letter to the Chief Executive/General Manager of the Sample Companies. Appendix 2 Covering Letter to the Chief Executive/General Manager of the Sample Companies. Appendix 3 Questionnaire for the Survey on the Attitude of Corporate Customers towards Banks and Banking Services in Hong Kong. JI APP— 1 I THE CHINESE UNIVERSITY OF HONG KONG 香港中文大學 SHATIN • NT . HONG KONG . TEL: ^ 6:。• •香港新界沙田.電話：六 R 六〇〇〇 603 7000 FAX •丨852) 603 5544 六〇九七〇〇〇 工商赞理學I院硕士課程 ,1 TEL.: 609 7783 MBA Programmes Faculty of Business Administration Contact Telephone ： FAX.： (852) 603 6289 Mr Donald Lam , 822 3584 13 November 1992 I Dear sir / madam, 1 • ‘. SURVEY ON ATTITUDE OF CORPORATE CUSTOMERS TOWARDS BANKS & BANKING SERVICES IN HONG KONG I We are conducting a research into the above topic. A mail survey will be launched to collect information about how corporate customers choose their bankers and their views & preferences on banking services provided in Hong Kong. Your company/group is among the 500 firms randomly selected from the membership list of the Hong Kong General Chamber of Commerce. I In a few days, you will receive a questionnaire on the captioned subject, v/e shall be grateful if you could spare a few minutes to complete that questionnaire. Please be assured that all data given will be kept strictly CONFIDENTIAL and will be used solely for this particular research. Your cooperation is of paramount importance in making our study a success. Thank you for your kind attention. Yours faithfully, I ‘ OHVh：)丨 Donald Y S Lam C H Ho I, Dr Dennis K K Fan Research Supervisor Department of Finance The Chinese University of Hong Kong 商安！ 懇請閣下將之填妥。所有資料將絕對保密及只作這項研究之用。多謝合作。謹集。 進啓者： 祝 J 貴公司是從香港總商會會員名錄中隨機抽樣選出五百間公司的其中一間。數天後，我們將寄上一份問卷我們現正進行一項有關公司顧客對香港的銀行及其所提供之服務的意態研究。各公司的意見將以問卷方式， 收 1i . I • . I. II I — I • I . . - -»V I • I 一九九二年十一月十三日 何志雄 林燕勝 ——^ Appendix 2 ^^^^ THE CHINESE UNIVERSITY OF HONG KONG 香港中文大學 SHATIN . NT . HONG KONG . TEL.: ^ fj,• iEtiS^^^aorc^U^H^^^'J^ •香港新界沙田.電話：六;^ ^L 六〇〇〇 603 /OOP FAX • (852) 603 5544 六•九七〇〇〇 工商管理i院碩士課程 TEL.: 609 7783 MBA Programmes Contact Telephone : Faculty of Business Administration Mr Donald L^m FAX.: (852) 603 6289 822 3584 17 November 1992 Dear sir / madam, SURVEY ON ATTITUDE OF CORPORATE CUSTOMERS TOWARDS BANKS & BANKING SERVICES IN HONG KONG I Further to our letter dated 13 November 1992, we would like to seek your assistance in our research into the captioned topic. This research is a partial fulfillment of the requirements for the MBA degree course at the Chinese University of Hong Kong. Other than that, the research has its significance in identifying how corporate customers choose their bankers, and their views & preferences on banking' services provided in Hong Kong. Thus banks in Hong Kong can improve their services accordingly and mutual benefits can be obtained by both banks and customers. In order to make this research meaningful, we need to collect information for analysis and your company/group is among the 500 firms selected for this study. We would be grateful if you could kindly spare around 10 minutes to complete and return the attached questionnaire. All information given will be kept strictly CONFIDENTIAL and ANONYMOUS. After the analysis, the questionnaire will be destroyed. Hence, you can be assured that the information you give will not be misused. Please return the completed questionnaire to us by mail using the enclosed self-addressed envelope before 04/12/92. 、 A summary of the research will be available upon request. Your cooperation in this research is much appreciated. Thank you very much for your kind assistance. Yours faithfully, ： 丨 I / , i 。i^i r^dvK. Donald Y S Lam C H Ho I ‘ 一 • . Dr Dennis K K Jhan ； Research Supervisor Departn'ient of Finance The Chinese University of Hong Kong — > . 巡啓者： I：, ；.. 要寄上。多謝合作0 問卷均會被销毁。 客户如何選擇銀行及他們對銀行服務的取向，從而銀行方面可改善其服務以滿足客户的要求意態調查問卷。 。 懇請閣下將問卷填妥後，用附上的回郵信封於十二月四日前寄回，若閣下需要，我們定將是項研究的結果此問卷只需閣下約十分鐘的時間便可填妥。我們保證閣下所提供的資料將絕對保密。當分析工作完成，所是项研究是香港中文大學工商管理碩士課程學生研究的其中一項。此外，是項研究更有助香港的銀行瞭解我方十一月十三日去函想必收悉，現懇請開下構妥隨信附上有關公司客户对香港的銀行及其所提供之服務撮 有 其 的 ， . 11 /. i _ # . 一九九二年十一月十七日： ‘ 何志雄 林燕勝 AppencHx 3 ATTITUDE OF CORPORATE CUSTOMERS TOWARDS BANKS AND BANKING SERVICES IN IIONO KOM t Sectioh 1 一 General Ql. I How many bankers does your company/group have at the moment ？ a. 1 b. 2 c, 3 d. 4 to 10 __ e. Over 10 __ Q1.2 Please state below the main banker(s) of your company/group, the percentage share of transactions through them and borrowing activities with them. I • '' ‘ ‘ I I • I I I I I I i I •” I •• . II I Share of Share of Name Transaction Borrowing Through Bank Activities Most ‘ Important % % Bank Second Most Important % % Bank Third Most Important % % Bank Q1.3 How long has your company/group established relationship with the most important banker mentioned in Q1.2 ？ a. Less than 2 years b. 2 years to just below 4 years 丨 c. 4 years to just below 6 years d. 6 years to just below 10 years e. 10 years or above Ql .4 In a 5-point scale below, please indicate how satisfied you are with the most important banker mentioned in Ql .2 above ？ (please circle '1' for very satisfied and ,5’ very dissatisfied) Very Satisfied Very Dissatisfied 1 2 3 4 5 i Ql.5 Has your company/group changed the main bankers in the last two years ？ a. Yes b. No I # 1 ATTITUDE OF CORPORATE CUSTOMERS TOWARDS BANKS AND BANKING SERVICES IN HONG HONO Q1.6 Have (Would, from your own point of view,) the following factors induced (induce) your company/group to change bankers ？ (please circle T for very likely and '5' very unlikely) ‘ Very Very Likely Unlikely a. New banker has better 'connection' with The People's Republic of China 1 2 3 4 5 e.g. with branch network in PRC or with PRC ownership b'. New banker provides your company/group with better electronic 1 2 3 4 5 banking services (*) c. New banker gives your company/group better lending rate 1 2 3 4 5 d. New banker grants your company/group with longer term Financing 1 2 3 4 5 e. Larger credit limits with fewer collateral required by new banker 1 2 3 4 5 f. Recommendation/Instruction from parent company 1 2 3 4 5 (if not related, please circle ’5’ for this factor) g. Desire not to rely on a single bank (to diversify) 1 2 3 4.5 h. Attractive presentation by the new banker's account officer 1 2 3 4 5 i. Not satisfied with quality of service provided by existing bankers 1 2 3 4 5 j. New banker has better 'connection' with the 1 2 3 4 5 country of major operation of your company/group k. Availability of specialized services fromjnew banker, 1 2 3 4 5 please specify 1. Others, 1 2 3 4 5 pleasle specify Q1.7 How frequent does your company/group use the following banking services in the last 2 years ？ (please circle ’ 1 • for very frequent, '5' very rare and .X' if you have never heard of it) , Never Very Very Heard Of Frequent Rare a. Current Account X 1 2 3 4 5 b. Savihgs / Time / Call Deposits X 1 2 3 4 5 c. Swap Time Deposits X 12 3 4 5 d. Corporate Credit Cards X 1 2 3 4 5 e. Imports / Exports Finance X 3 4 5 f. Electronic Banking Services (*) X 12 3 4 5 g. Phonebanking X 12 3 4 5 h. Factoring X 1 2 3 4 5 i. Forfaiting X 1 2 3 4 5 j. Financial Information Services e.g. Reuters X 1 2 3 4 5 k. Remittance X 12 3 4 5 e.g. Demand Draft & Telegraphic Transfers I. Foreign Exchange X 12 3 4 5 m. Safe Deposit Box X 1 2 3 4 5 n. Post-dated Cheque Discounting X 1 2 3 4 5 , Y 12 3 4 5 o. Leasing / Hire-purchase a ^ p. Investment Advice / Portfolio Management X I 2 3 4 5 Y 12 3 4 5 q. Management Consultancy 八 r. Business Travel Services X 12 3 s Trade Credit Information (banker's opinion) X 1 2 3 4 5 X 12 3 4 5 t. Trustee Services y 12 3 4 5 U. Insurance Services / Brokers ； 八 y 1 2 3 4 5 V. Retirement Benefit Scheme 八 w. Project Financing / Loan Syndication X 12 3 (*) using personal computers linked to bank's central computer for financial information and banking transactions such as payment, cash management, opcnmg of L/C elc. 士 士 ： I ‘ .二- • ： • •！r?r‘ w I •Wfy ^ ”,.’ ‘ lit .yu » t-^'t-^-iw-w I. ^ .11.Ill f 1,1 |-,jr .1- .- 1 _ I ‘ iiVii - r .. I .1 ‘ •“. ." I ATTITUPF, OF CORPORATE CUSTOMERS TOWARDS LIAMS AND BANKING SERVICES IN TTONG KONG I • ‘ I ！ 丨. . • I Section 2 - Bank Selection Criteria I “ i . Q2.1 Please choose 3 banks which you think the quality of services they provide are the best, from the following list, (please Write ' 1' for the best, '2' for the second and '3' for the third) a. Hongkong Bank b. Bank of China Group c Standard Chartered Bank ‘ d. CitiBank e. BankAmerica f. Hang Seng Bank g. Bank of East Asia ‘ h. Bank Nationale de Paris (BMP) i. Barclays Bank j. Sanwa Bank k. Sumitomo Bank 1. Mitsubishi Bank —— I m. Others, please specify /. ‘ I .. I II. — I ... in. — I 02 2 Please rale the following characteristics of bank/banking services in terms of how important you think they are for a bank to be the main banker of your company/group ？ (please circle T for very important and 5 not important at all) ！ Very Not Important Important At All a. Quality of service i 1 2 3 4 5 b. Operational efficiency 12 3 4 5 c. Good relationship with account officer 1 2 3 4 5 d. Account officer's knowledge/interest in your company/industry 1 2 3 4 5 e. Bank's reputation and its image 1 2 3 4 5 f. Larger size of bank (financial strength) 1 2 3 4 5 g. 'Connection' of the bank with PRC 1 2 3 4 5 ‘ (with branch network in PRC / with PRC ownership) h. Wide range of services provided 丨 1 2 3 4 5 i. Friendliness of bank staff 1 2 ? 4 5 j. Broad knowledge of bank staff 12 3 4 5 k. Extensive international branch networks where major 1 2 3 4 5 buyers / suppliers or parent company located. 1. Ease of assess to bank's branch/service (e.g. located nearby) 12 3 4 5 m. Availability of Electronic Banking System (*) 1 2 3 4 5 n. Loni standing relationship (track record with bank) 12 3 4 5 (*) using personal computers linked to hank's central computer for ruinncial inrormation and banking transactions such as payment, cash management, opening of L/C elc. 111 • 1ATTITUDE OFCORPORATK CVSTOAfERS TOWARDS BAmS AND BANKING SERVICES ！N HONG KONG j Q2.3 With regard to a bank's lending policy, please rate the following characteristics in terms of how important you think they are to your company/group, (please circle T for very important and '5' not important at all) I . , Very Not Important I Important At All a. Flexibility in structuring lines 1 2 3 4 5 b. Aggressive 丨ending policy 1 2 3 4 5 c. Fewer collateral required 1 2 3 4 5 d. Personal guarantee not required 1 2 3 4 5 e. Financial information not required 1 2 3 4 5 (e.g. financial statement) ‘ f. Low pricing/interest/charges | 1 2 3 4 5 g. Fast decision making 1 2 3 4 5 e.g. Account officer's power to make decision on the spot 一 h. Stable and persistent lending even 1 2 3 4 5 if "conservative" and stringent I I Section 3.- Demographics I . I 1 • Q3.1 How many employees are there in your company/group ？ a. below 50 — b. 50 -99 ‘ — c. 100 - 199 — d. 200 - 499 一 e. 500- 999 — f. 1000 - 4999 — g. 5000 or above ‘ Q3.2 What was the sales turnover (in Hong Kong Dollars) of your company/group in the last fiscal year ？ (,M, means million) a. below lOM — b. lOM - just below 25M — c. 25M - just below 50M 一 d. 50M - just below lOOM 一 e. lOOM - just below 500M — f. 500M or above — Q3.3 What is the gearing ratio (i.e. total bank borrowing/shareholder's equity) of your company/group ？ a. less than 50% 一 b. 50% - just less than 100% 一 c. 100% - just less than 150% 一 cl. 150% - just less than 200% 一 e. 200% or above : I I ..I Q3.4 Where is the country of major operation of y^ur company/group ？ a. HK : __ b. US — c. Japan — d. UK — e. Germahy 一 f. PRC 一 g. Others, please specify I I I I； ‘ I Q3.5 Where is 丨your company/group's place of domicile ？ a. HK I — b. US c. Japan — 丄 UK — e. Gernia|iy “ f. PRC — g- Bermuda — h. Cayman Island — i. British Virgin Island __ ' j. Others, please specify Q3.6 How loni has your company/group been established ？ a. Below ‘ 1 year 丨— b. 1 year - below 3 years — c. 3 years - below 5 years __ d. 5 years - below 10 years __ e 10 years-below 50 years 一 g. 50 years or above 一 \ iv ‘ I ’ ‘ ！ i! 'AT^lTUPl： OF CORrOKATK CVSTOMKRS TOWARDS BASKS ANO HANKINO SKRVICES IN tlOPfO KONO I 丨, I I ； ‘ :j ： 1 i I I i i ‘ I ： J • i I ‘ I Q3.7 Which industry sector does yoiir company/group belong to ？ (Please choose the one that best matches) a. Manufacturing i b. Importbr / Exporter / Shipping / Warehouse I c. Service / Finance d. Land & Property Developrrient e. Engineering f. Trading , g. Retailing 1 ‘ _ h. Others, please specify [j Q3.8 Does your company/group have any "connection" with PRC (e.g. trading or investment) ？ a. Yes ’ please specify how long : years b. No ,— Q3.9 Who made the decision to choose the existing main banker(s) in most cases ？ a. Chairman of Board of Directors —— b. Chief Executive Officer/Managing Director —— c. Chief t^inancial Officer/Financial Controller —— d. General Manager • I ； e. Owner of the company i —— I • f. Others, please specify —— I i I I 1 I ‘I ‘ I I END PLEASE RETURN WE QUESTldNNAlRE TO US USING WE ENVFJMP PROVIDED WANK YOU I .！ t I ‘ I I ！ I ,< j ‘ 1 i I , t V I "“‘,•«，件MMHFLiw-^MTT-NF^• —n” ‘ • 一_ ^ . I - ‘‘ ！ . » r ;t • • • '1 I • . » >. I III-- -T •' -•— • — — . 、‘ ‘‘ • •. * 公司客户對香港跟行及其服務意.態詞查 甲.概略 1.1貴公司/集團在現階段使用多少間銀行？ a. —間 ； b.兩間 ,C.三間 d.四至十間 e.十間以上 I 1.2請列k丨貴公司/集團的主要銀行的名稱，經它們的交易量及借資的百 分比。 - ‘r~7 ,1經這銀行的I經這銀行所得 交易百分比借貸的百分’比 最主要I ’ ％ % 第二主i % % I ； — —t — 第三主号 % % I 1.3貴公司/集團與上述最主要銀行的關係建立了多久？ a.少於兩年 b.兩年一少於四年 e.四年二少於六年 I d.六年一少於十年 e.十年或以上 I I 1.4你滿I意上述最主要銀行所提供的服務嗎？（，1，代表極滿意，'5,代 表極不滿意） t , 極滿意 極不滿意 1 2 3 ：4 5 1.5 .貴公司/集園在過去兩年曾否轉換了主要銀行？ a.有 b.沒有 公司客户-f,丨香港報行及其服務意態詞査 1.6下列因素曾否（或你認爲會否）導致贵公司/集園轉換銀行？ (，1’表示極可能，，5,表示極不可能） . 極 極不 , , 可能 可能 a.新銀行與中國大陸有更好的「聯I�，例如在 12 3 4 5 ,：中國有分行網或銀行有中資成份 b.新銀行提供電子銀行服務 I 1 2 3 4 5 C.新銀行給與貴公司/集團更低的借貨利率 12 3 4 5 c3.新缺行提供貴公司/集團更長遠的財務安排 1 2’ 3 4 5 e.新銀行可提供更大的货款額，但本需少許抵押 1 2 3 4 5 f.母公司指示或提議（若不適用，選擇'5，） 1 2 3 4 5 g.不想只依賴一間銀行丨 1 2 3 4 5 h.新銀行的货款主任的有説服力 1 2 3 4 5 i.不意舊•有銀行所提供的服務赏去 1 2 3 4 5 j.新碰行與貴公司/集團的主要營達地方有較好 1 2 3 4 5 的會 k.新輝行可提供特別的服務’ 1 2 3 4 5 請li明 ； 丨， 1.其巧，請li明 I 1 2 3 4 5 1.7貴公司/集團在過去兩年經常使用下列銀行服務嗎？ (’r表示極頻密，，5,表示極不頻密，，X,未曾聽聞） I 未曾 極 極不 ‘ 聽閒 頻密 頻密 a•支票I户口 丨 X 1 2 3 4 5 b.儲营/定期/通知存款 X 1 2 3 4 5 C.掉期I存款 X 1 2 3 4 ‘ 5 d.公司信用结 X 12 3 4 5 e.出入口財務安排 X 1 2 3 4 5 f.®子銀行服務 X 1 2 3 4 5 g.雷話銀行 X 1 2 3 4 5 h.出口姑現服務（Factoring) X 1 2 3 4 5 i.Forfaiting X 12 3 4 5 j •財經資訊服務，如路透社資料 X 12 3 4 5 k.游款1，例如雁票，電滙等 X 1 2 3 4 5 1.外游 I X 12 3 4 5 m.保險箱 X 1 2 3 4 5 n.期票彳現服務 ： X 1 2 3 4 5 0.租赁丨 ； X 1 2 3 4 5 P.投資問服務 X 1 2 3 4 5 q.管理顧問服務 X 1 2 3 4 5 r.商務旅遊服務 I X 1 2 3 4 5 S.貿易伙伴信用資料（銀行意見） X 12 3 4 5 t.信託服務 I 1 1 2 3 4 5 U.保險/經紀 X 12 3 4 5 V.退休金計劃 X 12 3 4 5 W.融資 X 12 3^5 , ii ‘ ！ 公司客户對香港級行及其服務意態垌查 I I 乙.選擇銀行的條件 2.1從以下的銀行，請選出三間^認爲其服務質素是最好的。（，1，表示 最好，，2，表示第二，，3，表示第三） .a.香港上海滙豐銀行 b.中銀集團銀行 C.逢打銀行 d.萬國寶通銀行 e.美國銀行 — f.恒生銀行 一__ g.東亞銀行 h.法國國家巴黎銀行 i.括克萊銀行 j.三和銀行 k:住友銀行 1.三菱銀行 m.其他，請柱明1. ： 2. ： I 3. 丨 ^ ！ I I ^ I 2.2你認爲作爲貴公司/集團的本要銀行，下列銀行/銀行服務的特質 有多如要？（，1，表示極重今：，’5,極不重要） ‘ 極 極不 重要 重要 a.服i务質素 12 3 4 5 b.搡卩乍效率 r 2 3 4 5 c.銀行贊款主任與貴公司/集團有良好關係 1 2 3 4 5 d.銀行職員對貴公司/集團或所屬工業的認 1 2 3 4 5 識/興趣 e.銀行的聲譽及形象 ’ 12 3 15 f.財I力雄厚 ； 1 2 3 4 5 g.银行與中國大陸的「聯繁」，如在中國有 1 2 3 4 5 分行網或銀行有中資成份 h.多：元化的服務 1 2 3 4 g i.銀行職員的友善態度 I 1 2 3 1 g j.銀行職員的知識： ！ 1 2 3】2 k.銀行在貴公司的主要買家/供應商或母公 12 3 4b 司i所在地有完善的分行網 1.：^便，易達 I 2 3 5 m.有電子銀行系統 。/I A n."^公司與銀行有長久及一好的關係 1 Z 4 D I I I t 111 \ I . • .公司客户對香港跟行及其服務愈態纲查 I 2.3你認爲下列有關銀行貨款方蘖有多重要？（，1，表示極重要，，5，極不重 要） 極 極不 , 重要 重要 • a.彈性貸款形式 1 2 3 4 5 b.積極的貸款態度 I 12 3 4 5 C.只需少量抵押 1 2 3 4 5 d.無需私人擔保 12 3 4 5 e.無需提供詳盡的財政狀况 1 2 3 4 5 f.低廉的服務費/利息 1 2 3 4 5 g.銀行的貸款主任決策快彳 1 2 3 4 5 h.d、健的借貸態度 i 1 2 3 4 5 丙公d資料 1 ‘ I 3.1貴公I司/集團有多少僱員？ I I I ： _ a 少於50人 b.50-99人 c. 100-199人 —— d.2()0-499 人 e.500-999人 f. 1000-4999人 g.5000或以上 3.2貴公司/集團在上一財政年度有多少收入？ a.少於一千萬 ； b.—千萬一少於二千五百萬—— C.二千五百萬一少於五千萬_ d.五千萬一少於一億 —— e. 二億一少於五億 f.五億或以上 —— ！ ‘ 3.3貴/z：^司/集團的銀行借款與股東資本的比例爲： I a.50o/o 以下 丨 一一— b.50o/o—少於—— c.lOOo/o—少於 150O/O __一 . (1,1500/0—少於200O/O —— e.200%或以上 . i i 3.4貴公司/集團的主要營運地方是： a. ‘港 b.:美國—— —— d.無 國 e.德國 f.中國大陸 g.其他，請柱明 — I I I I iv ！ 公司客户對务港极行及其服務龙態納查 3.5貴公司/集團的柱册地爲： a.香港 b.美國 C.日本 d.英國 e.德國 f.中國大陸 • g.百慕達 h。開曼群島 i.英屬處女島 ‘j.其他，請柱明 ^ 3.6貴公司/集團成立了多久. ？,1 I I ： a. I少於一年 I b. —年一少於三年 C.主年一少於五年 d,五年一少於十年 e.l十年一少於五十年_____ f•五十年或以上 I i 3.7貴司/集團是屬於那一行業？ ‘ a.製造業 b.出入口，船務，貨倉 C.服務'財經 ’ d.地產建築 e.i工程 j f.貿易 g.零售業 ___ h•其他，請柱明 I ； i 3.8貴公司/集團與中國大陸有沒有「聯繫J，如有貿易伙伴或投資在中 國丨？ ‘ I a.l 有 ，請柱明多少年： 年 b.沒 有 I ！ I 3.9在多數情況下，貴公司/集團是由誰人決定某銀行爲主要銀行？ I I 1 a.i董事局主席 ‘ b.行政主管 C.I財務主管 d.總經理 e.老閣 , f.其他，請柱明 〜‘完 〜 請用附上的信封將這問卷寄回 多謝合作 V 103 I i BIBLIOGRAPHY I I I ‘ i I BOOKS i ‘ I Carey, T P A. Strategy Formulation bv Banks. UK: MCB University Press Ltd, I 1989. Channon, Derek F. Bank Strategic Management and Marketing. UK: John Wiley and Sons Ltd, 1986. I Cheese J. Insights in Bank Marketing. UK: MCB University Press, 1984. Federation of Hong Kong Industries. 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